Actually, this situation only came about because we (thought) we had already lined up a retail buyer for the property. It’s not what I’m looking to do - yet - need to learn one thing at a time! It just so happened that a mortgage broker mentioned they had a buyer with $20K cash and already qualified for an 80% mortgage that REALLY wanted to buy a house with almost the exact specs in Boca for about $135K. If we could get the house for about $128, and get the seller to take a $7K second, and sell the house for $132,000, then the buyer would be able to get into the house - and we could walk with a couple thousand. It would have been a “retail flip” - no costs to me at all. Have since given it up - too many “ifs”. We would basically have been paid to structure the contract - but if the buyer didn’t like it, he didn’t have to take it, and then we’d have a house under contract for, as you said, retail, which is not in my plans. I’m not comfortable yet putting contracts on properties I don’t think I can sell fairly quickly.
I suppose there are ways to still do this - e.g. sign a contract with short-term weasel clause (e.g. inspection within 15 days, but stretch the closing to 45-60 days) and then go to the buyer, lock him into an assignment of contract, and give it to him so he can close within the time-frame. If no buyers found within 15 days, release the house. No hard feelings. Must get buyers lined up first, though. And they have to be willing to pay for the creativity.
This may seem strange, but I’ve been so focused on getting cheap, beat-up houses that when I come across a good-looking, well kept home I don’t know what to do! (3 offers out on not-so-pretty homes, 1 almost guaranteed acceptance, two with 3 options in front of them)
I fell upon a home that is for sale, listed, for $134,900, comps at a couple thousand above that. So what’s so great about that, you ask? IT’S PAID FOR! Great community, very, very well kept, no work whatsoever on it. This could be a sweet deal, if I knew what to do with it! The owner is an elderly lady, moving to Vermont to live with her son. She doesn’t want to hold paper, for obvious age reasons. What can one do?
She may consider creating a note for a simultaneous close - and maybe holding a small second, if we can offer a quick sale. We put in an offer for $128,900 on an offer form, thinking of maybe doing a quick retail flip (for a couple thousand bucks), but before they accept the offer (if they do), we don’t know what to negotiate on the contract that would make it attractive to a retail buyer, above and beyond a few thousand off market.
This smells like it could be a good deal - any ideas? Even if not for this one, I’m sure we could find other homes in the same situation.
The situation I see with this house is it’s breaking the first rule of Real Estate Investing, which is to make your money with the purchase. If the house is worth $135,000, and you are buying for $128,900, where is the profit?
By the time any closing costs and any other expenses are taken care of, you are stuck trying to do the exact same thing she is, which is sell at Retail. We know the market in Florida is not exactly the greatest at retail, and some homes will stay on the market for six months or more. Who is going to make the mortgage payments during that time? What makes this house any more attractive than any other, especially at a retail price?
I would personally try to locate houses that have at LEAST 80% LTV or less as the purchase price in order to make the profit going into the deal, not trying to figure out how to get it in the back end, because that is usually what will happen!!(from experience…)
I would personally let this one go, and look for deals that are a little bit sweeter. If you’re going to go through the trouble, make it worth your time and effort.
Well, you gave a lot of information but what you didn’t give is what YOU want to do with it. Do you plan to buy it and resell it, or do you plan to buy it and hold it, or what?
I’m assuming buy and hold, so in that case you want her to take her cash over a period of time. I know you said she wasn’t interested in that, but actually what you mean is she doesn’t want to take it over TOO much time. I’m sure if you asked her to spread it out over 3 months, she’d say yes, but if you asked for 30 years she’d say no. Somewhere in the middle there is a number in her head that is the longest she’d be willing to wait for all the money. Find out what that number is, if you can.
Maybe you can create a first in escrow and simultaneously sell it to create the down payment, then give her a second with small payments that will increase every year as she gets more and more of her money back, with the entire amount due in 6 or 7 years.