Help me please! - Posted by Pavon Bailey

Posted by Vic on May 20, 2000 at 19:19:32:


Hi! You are 100% correct about the pmts. I was in a rush when I was typing that response. As a result, I wasn’t as clear as I should have been. I knew what I was trying to say, but just didn’t get it said the way I wanted to.

Thank you for correcting the post though. It’s the sharp guys like you that keep the integrity of this board what it is.

Hey, next time you’re down here, be sure & look me up & we’ll go have a Hurricane at Pat O’s (Pat O’Brien’s). Hmmm…wondering what that would do to my posts. LOL


Help me please! - Posted by Pavon Bailey

Posted by Pavon Bailey on May 19, 2000 at 20:20:20:

Greetings investors!

First off, I would like to say THANK YOU ED GARCIA for the nice and interesting conversation we had on the phone a while back. You made me realize that REALTORS sometimes do not know what they are talking about. THANK YOU FOR THE ADVICE AND TALK!!!

Now, on to this deal…

Found a property in River Ridge, LA. Very lovely neighborhood; property is cream of the crop. Here’s the info:

4br/2.5ba, Acadian style, 2 car garage, owner will finance…just to summarize.

Here’s the financing: Property is worth 390K and has an underlying 1Mtg balance of $322K. Mtg is NOT assumable. Seller is very motivated…moving out of state…needs a quick sale. I was planning on making 4 offers…see if you pros like any of them or tailor them to your liking…

OFFER 1: $285K all cash…

OFFER 2: $325K, $5K down, $320K all due and payable within 1 yr, no int., no pymts. $5K down is taken back in the form of a promissory note secured by a mortgage…

OFFER 3: $340K, $112K down, seller to subordinate $228K to a new 1 Mtg…

OFFER 4: $350K on a lease option…offers 1 and 4 require no money down…

Please tell me which one you all like best or please tailor it to fit your needs. I need to make these offers next week, say, Monday! He’s expecting me to make him an offer.

Thank you all for your time and have a wonderful day!!!


Re: Help me please! - Posted by Vic

Posted by Vic on May 20, 2000 at 06:40:11:


Hi! I’m a real estate broker right here in Metairie.

I don’t know if you realize it or not, but River Ridge is a very hot market right now. Even though that’s the case, it is still very difficult to sell a 379K house.
It will probably take you a few mos. to do, & you may end up needing a real estate agent to get it done at that price level. You don’t have that many people looking to buy 379K houses that aren’t using a real estate agent. If someone can afford a house in that price range, they are probably a more sophisticated buyer than average. Their time is probably more limited as well, thus they use professionals to help cut down the search time.

Further, the offers you’re proposing probably do not address the seller’s needs. You need to find out what those needs are.

In one of your offers, you talk about putting down 5K. That won’t even cover the guy’s moving costs. In another offer, you talk about l/o. Unless the seller has an extremely high income, he would probably have a difficult time qualifying for a new loan, as 75% of his current mo. pmt. would count against him, when computing ratios.

If you have a seller that is willing to finance, & if you want to get involved with such a high priced property, your best bet would be to find out how much the seller wants as a down pmt.

In one of your offers, you said something about putting in 112K. If you have 112K in cash, the best way to handle this deal is to give him the cash that he wants (if reasonable) & then take over property using an Escrow Agmt. After you do this, turn around & offer the property owner financed also by Escrow Agmt. to a new buyer, getting your up front cash back from the new buyer & charging them a higher int. rate If possible, you might also try to get a higher sales price. Keep in mind that with an escrow agmt. in Louisiana, if you’re more than 45 days late on a pmt., the property very easily reverts to seller. There is no forclosure process on this. It’s automatic.

If you can negotiate a good enough int. rate from the seller, you can make your money on the spread on the int. rate & maybe a few thousand on sales price.

With that said, if it were me, I would probably pass on such a high priced property in this area, as it will be very, very difficult to sell, even using owner financing. Best to stick with the lower priced properties unless you’re willing to carry the property for some time until it gets sold.

If you need further help, just email me.


Re: Help me please! - Posted by JPiper

Posted by JPiper on May 20, 2000 at 02:29:15:

I have two problems with your offers:

  1. There is no discussion in your post about what you intend to do with the property. The best offer for you is the one that starts with an EXIT STRATEGY firmly in mind.

  2. Four offers is three too many in my opinion. The idea is to sit down with the seller, ask enough questions so that you understand what may work for his situation?.keeping in my that whatever might work for him MUST ALSO work for you in terms of a profit and exit strategy.

That doesn?t mean that there might not be 4 possibilities that you could offer. I just wouldn?t offer them all. Keep them in the back of your mind. Make one offer. If the seller has a problem with it?believe me?he?ll tell you. THEN, depending on what the problem is, you trot out a second offer. To me, when I see 4 offers, I think you haven?t talked to this guy well enough to understand his situation.


Re: Help me please! - Posted by JohnBoy

Posted by JohnBoy on May 20, 2000 at 01:20:24:

Offer #3 wouldn’t work. The seller has a current mortgage on the property for $322k. Your $112k cash would not pay off the first in order for the seller to subordinate in this case. If you were offering an amount equal to or more than the existing first then the seller could subordinate to a new first.

You could take the current loan over “subject to” the existing mortgage. The seller would deed the property to you while you would take over the loan without dealing with the bank. They don’t need to know about it.

Are you in a position to cover the payments on this property for several months if you run into any problem after taking it over? If not, then don’t do this deal unless you just make a cash offer to tie it up for a month or two and try flipping it to someone else.

Re: Narrow the playing field - Posted by Lori samson

Posted by Lori samson on May 20, 2000 at 24:43:48:

I think you are going to make him mad with the first one. If you can finance this deal that sounds fine but when you said that it is LA(we lived many years there) I would say that is a high end house. If you lease option it you are dealing with high payments and a smaller amount of people that can afford payments that high and it takes a lot longer to get it moved. We have about 50 properties that are optioned and we stay out of anything that is over 175,000. The rents are too high is you have a default and have to cover the payments, you can lose all your profits really fast. If you are a newbee, why not flip this property to someone who can handle the risk of high end properties and make 5000 off of it? If the numbers are eally there you should be able to tie it up with just an option and sell the option to another investor or run an ad advertising it. Lori

You need to choose one or two offers to fit the “SELLER’S” needs… not ours. - Posted by Dealmaker

Posted by Dealmaker on May 19, 2000 at 22:25:26:

Have you ask the seller about his/her situation? Why are the selling? What do they need the money for? Is the seller concerned about their credit?

Find out the seller’s problem and base your offer to solve their problem.

** One thing newbies need to know about high-end houses is the fact that they sell at larger discounts than cheaper homes. Often below appraisal unless you’re in Atlanta, San Fransisco, Southern Cal…etc…

Is this a market HOT there? Why hasn’t the house sold thus far? I think you need to do some more research and talk with the seller again.


Re: Help me please! - Posted by Pavon Bailey

Posted by Pavon Bailey on May 19, 2000 at 20:23:14:

Sorry, forgot to mention…he’s selling house for $379K and I am still a newbie! smiles

Re: Help me please! - Posted by B.L.Renfrow

Posted by B.L.Renfrow on May 20, 2000 at 09:28:05:

Hey Vic,

How are things going for you down there?

I agree with your advice; however, I think you’re a bit confused on one point:

“Unless the seller has an extremely high income, he would probably have a difficult time qualifying for a new loan, as 75% of his current mo. pmt. would count against him, when computing ratios.”

Actually, the usual scenario when the SELLER of a lease-optioned property applies for a new loan, is that 75% of the TENANT’s monthly rent payment is counted as INCOME, while 100% of the SELLER’s monthly mortgage payment is counted as DEBT. It can and does vary by lender, but I have found that figure to be pretty typical. That’s where the 75% figure comes from.

Brian (NY)

BTW - One of my favorite pairs of shoes just got a new lease on life at the leather shop…a pair I bought in New Orleans on a trip years ago…one of the most unique cities in the US, in my opinion!