FIRST DEAL...REVISITED!!! - Posted by Pavon Bailey

Posted by steph in tex on February 03, 2000 at 14:07:51:

just from your post, i would venture to say this guy may not be as motivated as you think. 2 offers?
but they were crap…hmmm…? this doesn’t scream motivation to me. i think he will consider a “low ball” offer from you as crap as well-plus he is listed with a RE agent who will probably not encourage such a deal. Qualifying assumptions do require you to qualify for the loan- so whats the point? just my thoughts-
but i wouldn’t get my hopes too high, but then- hey- stranger things have happened! good luck.
steph in tex

FIRST DEAL…REVISITED!!! - Posted by Pavon Bailey

Posted by Pavon Bailey on February 03, 2000 at 12:01:28:

Fellow investors:

I was mistakenly misquoted. The figures I posted on my previous message is not right. Here are the stats:

SFH, 3BR/2BA, 1 half bath, 2 story, desireable neighborhood, house has a separate building used for a guest house, office, party room, etc. House needs very minor cosmetic repairs (can tackle on a weekend), but the guest house needs a new floor.
Lot size: 50x170 SQ FT: 1325, extra bldg: 1000 sf w/1/2 bath. House comes with central heat & air. Patio, laundry room, but no garage is included. Very nice house. Going meet seller to make offer on Sunday.

Very motivated (I don’t waste time w/ unmotivated sellers)…he has a job transfer for a big firm in Houston so he’s selling the house. he needs to sell before he leaves, which is 2 months from now. The house been on market for 1 month. Seller says he got two offers, but they were “crap.” He rejected the two offers without a counteroffer.

Asking Price: 143K. Has outstanding 1 Mtg for 101K, fully assumable at 6.5% interest. Monthly payments: $645/month principle and interest. However, the assumption has these two restraints:

  1. The buyer must be an owner/occupant in the property for at least 1 year…and
  2. The buyer has to qualify to assume the loan. Why? I do not know. He has the property listed with a broker. Transfer of assumption fee: $800.

What type of offer I should make? I want to make an all cash offer (w/ a low price), a offer for asking price w/ favorable terms, and a L/O deal. I have an investor that I can possibly “flip” the property to or assign the contract to him for a profit.

Thank you for your assistance, and happy investing to you all!


Re: FIRST DEAL: a couple ideas - Posted by B.L.Renfrow

Posted by B.L.Renfrow on February 03, 2000 at 20:56:53:

In addition to what Steph said - with which I completely agree - realize that a qualifying assumption really offers no advantage over your going out and obtaining a new mortgage. As for “why” the lender requires you to qualify to assume, that’s the way it’s done in order for the lender to protect their interest. Non-qualifying assumptions are VERY few and far between these days, generally either a private mortgage or an old VA/FHA loan.

Any loan, however, is “assumable” via a land trust or PAC trust arrangement. You might want to consider that, as the terms of the existing loan certainly are favorable, if that’s a fixed-rate at 6.5%.

I agree this seller doesn’t sound terribly motivated, but he might become more so as the time for his move approaches.

Here are a couple other approaches you might consider, but before you do, you MUST get comps on the property so you KNOW what it’s worth. Never take the seller’s or the listing agent’s word for a property’s value.

If comps support a FMV of, say, $140k, you could offer, for example, $120k cash. Then you offer it with owner financing for $145k, and arrange a simultaneous close with a note sale to get the cash to pay your seller.

Alternatively, you could offer close to asking price if the seller will L/O it to you for his monthly PI payment. It sounds from your description as if you could likely get far more from a tenant/buyer. Probably not any back end profit in this scenario, but could be decent monthly cash flow, plus a hefty option consideration up front from your T/Ber.

Finally, if you’re not really sure how to go about these methods, just see if the seller will give you an option for maybe 10-15% under FMV, then you can market the heck out of it, or just assign your option for a small fee. That’s obviously not as profitable, but it’s a good way to get your feet wet in the business, and learn as you go.

Brian (NY)