help !! how to finance this deal? - Posted by Nancy PA

import · July 12, 2003, 10:48pm

Posted by Tom-FL on July 13, 2003 at 01:48:35:

I have heard of something similar and I don’t know if you can find enough stuff to separate out of the deal. I’m can’t even remember the exact details or why it was done, but it went something like this. They separated the “real” property from the “personal” property and conducted two sales. It was nowhere near 500k though. It may have been around 100k, and simple things like excluding the refrigerator, the washer & dryer, and several other things got them a 8-10k split off. I think it’s because the personal property doesn’t add much to an appraisal but it still costs a bunch to buy it. Anyhow, someone will probably offer a more crystalized view of the how and why on this. This was in the US btw.

import · July 12, 2003, 10:48pm

Posted by Nancy PA on July 12, 2003 at 22:48:39:

First of all, I want to thank those who took the time to reply to my previous postings. I got lots of good advice and information. Thank you very much! This is a great site with many great people!
I’m in a situation and is desperetely seeking for help!!
I’m helping my friend selling his property. This is a beautiful single home, 2 yr old, over 3200 sf living space, in Philadelphia city, sitting on a park… there’s no other home like it being sold in the area. It’s under contract for 529,000 with 2.5% seller assist on closing cost. (the buyer is an real esate agent, so we agreed to assist her the same amount as we would otherwise pay a buyer’s agent). she was going to morgage $400,000.

Now, the difficult part is doing an appraisor. Homes sold in the area are around $300-$400,000, one neighbor got his appraised during refinance for $527,000 (but his has more improvements),but they will not recognise this value in the comparable sale during an appraisor. So looks like we can get the most $500-$510,000 for the appraisal…Is there a way to finance it for $529,000 sale’s price without having to put up extra money from both seller and buyer? I’m looking for a more win-win solution. I don’t want the buyer to back out of the sale. she wants to put down at least 20% in the home to avoid PMI and she also wants seller assist to reduce closing cost.

The buyer doesn’t want to put up more cash to morgage the lower appraised value and pay be the difference. (I don’t know why would the morgage company not morgage a home that’s a little over priced if the buyer is putting down 20% of the higer sales price)

I’m thinking of reducing the sales price to reflect the appraised price, then reduce the amount of seller assist according, but I don’t know if the buyer will agree since she’ll have to put up more cash for closing.

Is there a way to have her finance say 500,000 and the seller finance the rest? but I don’t know what kind of term it should be on. I need to protect my friend’s interest.

I need to think of a good solution early next week.
Any advise is greatly appreciated!

Nancy
610-805-4162

import · July 13, 2003, 12:38pm

Why is this your problem? - Posted by gerald(tx)

Posted by gerald(tx) on July 13, 2003 at 12:38:06:

I know this sounds a little cynical, but I’m asking myself why this realtor/buyer doesn’t know where or how to get this property financed. Why doesn’t she know a appraiser who will handle this? Even if she is a neophyte at RE, she should have a whole office, a broker to advise her.

Why does the problem belong to a third-party who is a friend of the seller, who has limited experience, and not the access to all the resources an agent would have?

import · July 12, 2003, 11:05pm

Re: help !! how to finance this deal? - Posted by Arthur

Posted by Arthur on July 12, 2003 at 23:05:36:

This is just an idea, and i don’t know if it would work in the US (a useful trick in the UK to avoid something we call stamp duty - a tax of 1% on all property over $xxk)…but sell the house for $510k, and the “fixtures” for $19k, with the seller financing the extra and securing it as a second mortgage on the property.

import · July 13, 2003, 12:15am

Re: help !! how to finance this deal? - Posted by Nancy PA

Posted by Nancy PA on July 13, 2003 at 24:15:54:

Aurthur,
Thanks for the idea. I’ve not heard of anyone doing this here, I think in US fixtures are included in the real property. I’ll find out if I’ll be able to apply this on the shed, which is would cost around 2k (hope we have a small gap to close), detached from the house. Thanks!!
I don’t have much knowlege about seller financing. So the buyer will hold title to the property, with the seller financing as a second lien on the home… if the buyer defaults payment to the seller but is current on the first morgage,what actions can the seller take?

thanks!

import · July 13, 2003, 11:18am

Re: help !! how to finance this deal? - Posted by Arthur

Posted by Arthur on July 13, 2003 at 11:18:29:

Well, you could use the shed, washing machine and dryer, fridge, cooker, curtains (some curtains are very expensive, the ones youleave don’t have to be).

When doing something like that, i don’t know if you would even have to tell the bank. I guess it would depend on how you want it done. What you could do is a contract based on another…i.e. “I agree to pay $19k secured on my house to Mr & Mrs XYZ in installments of abc over x amount of time. This contract comes into force upon the sale of 123 somewhere avenue to Mrs Y from Mr & Mrs XYZ”.

Another option would b e to tell the bank about the fixtues and fittings, and get them to fund it.

I’m just brainstorming here, throwing ideas into here, what i might be saying may not be possible, i dont’ know. When i have done something like this before in the UK, i just had it added to my mortgage, but that was just a few thousand, not 19.

Another idea is to get another appraisal done by someone else. You would probably have to pay for that. If it came up with the same answer, then i guess you would have to accept that your property is not worth as much as you thought it was. If they come in with a higher figure, then maybe you could take that to the bank and get them to accept the higher valuation, after all, the buyer is a real estate agent (perhaps getting her to show her resume to show she knows what she is doing).

As for if they default, i would have thought you could have the property foreclosed on, but to take possession of it, you would have to settle with the first lien holder. But hey, theres 20% deposit down at purchase, theres plenty of equity that she would not want to lose.

Good luck.