Posted by Judy Miller/American Note on June 09, 1999 at 16:52:59:
Sophie: There are some variables/unknowns here that could make a difference in whether there is a way to work out this transaction.
The Seller wants $42,000. Will he take any less to move the property “as is” quickly? Usually a Seller will if motivated enough. The less amount of money you have to put into the transaction, the less the variables could weigh against you.
Let me provide you a hypothetical. If the comps in the area are so good, then perhaps based upon square footage, etc., the house could be valued at $55,000. Cosmetics are not the determining factor in setting the appraised value of the house.
If then your purchase price to the Seller was $55,000, and the Seller agreed to carry back a private mortgage for $50,000, structured at 12% interest, amortized over 20 years with a ballon in 10 years ($38,373.14), this would leave you monthly payments of $550.54 on the $50,000. You could receive a “fix-up” credit for the $5,000 downpayment, and would need to provide some proof that you intended to fix the house up with your own sweat equity and money to fix it up.
What we then have is a sale at $55,000, $5,000 credit for “fix-up”, and a $50,000 note that you have to pay over the next 10 years. That gets you into the property with no cash down except your commitment to do the fix-up work, and we would purchase that $50,000 note from the property seller (even at closing as long as some of the work had been done) and pay the Seller $42,000 for the purchase of the $50,000 note he is holding.
The issue of your credit IS relevant, your experience with rentals and repairs, etc., as well as where the property is located (city/state).
This is a very BROAD BRUSH scenario and not to be relied upon, because we don’t know enough at this point, however, it will give you some food for thought!
Best Wishes, Judy
Or the sales price could