Just like w/ MHs, owner financing deals sell pretty quickly where I am. I agree that if I were paying $210,000 cash for this house, that would be suicide. But, I have very little doubt that I can get $20,000 down from an owner occupant. Plus I’ll have about $400/mo spread on the payments, and a decent little payday at the end. It’s the $10 grand that’s hurting. I’m still in a position that I’ll notice that much missing from my IRA, even if it’s just for a short time.
Here’s the deal. House is worth about $225,000. Has a non qualifying assumable of $112,000 @ 10.7% interest, $1088/mo PITI. Seller will let someone assume the loan and will take a second if he gets $40,000 down. I tell him he may as well be asking for a million because neither one’s going to happen (got that from Joe Kaiser). He really wants to be done w/ this thing by the 15th. It’s been vacant for 4 months, but it is in good shape. I tell him I can give him $10,000 down, assume his first, and give him a second for $88,000 for a total price of $210,000. He says fine, if I can give him the $10,000 and close by the 15th. Problem is, I don’t have the $10,000 w/out dipping into my IRA, which I’d prefer not to do. Now the house is in a good area, and I’m reasonably sure I can get $20,000 down from a buyer rather quickly and sell on a wrap. Now before anyone suggests I tell him I’ll give him the money when I get a buyer, I already tried. His response? Actually a pretty good one: “Why should I let you give me $10,000 when I really want more, for you to tell me you can only give it to me when someone else gives you more than that? That could take 2-3 weeks, and in that same time frame, I might find someone who would give ME what you want them to give YOU.” Gotta admit, I didn’t have a comeback for that one, so I agreed to pay him the 10 and close by the 15th. Anyway, anyone got ideas on how to pull this off? I’ll dip into the IRA if I need to so I don’t lose the deal, but I’m just trying to think of alternatives. Also, if anyone has a snappy comeback to the above mentioned objection, I’d like to hear it. Thanks.
Find out how much of a hurry he’s really in. Retract your offer. If you can come up with the 40K(somehow) offer to buy it for $142,000 (or slightly higher if he carry’s a small second)and close by the 15th. Give him the option to sell it to someone else at a higher retail price, if he pays you a 5K premium.
If you can perform, he knows he has it sold and he gets his 40K and you should now definitely have a great profit(worth dipping into IRA?.) If he finds another buyer, you make 5K. It’s probably a long shot, but it’s an idea…
Move some of your IRA funds into a self directed, ie…10k. Mid-Ohio is who I use. Simple process. Now write up a partnership agreement with your IRA and your trust. You said you could easily get 20k down. Raise the price of the house, 10-15k or so and sell with Owner Financing on a Contract for Deed.
Assume the loan in a trust, also the 2nd in a trust, nothing assumed directly in your name. Now sell the house, with the first 10k going back into your IRA, and split the profits however the agreement was written up.
Make sure comps verify the 225k, and check days on the market before sold. Owner Financing should make it fly out the door.
If the house is worth $225,000 and your buying it For $210,000 Were is the deal. Your putting 10k of cash in for a 15k profit on the top that may not even exist. The first 20% does not count in equity till it’s in your hand so you can’t figure it in as worth $225,000.
Maybe i am missing somthing but it seem like your paying retail.
I would take a second look. Me I would walk given the facts you have Stated.
Tom, First, Joe is probably right about the time needed to close, but in my limited experience, if you DON’t want it to happen, it WILL!
All things being equal (which they never are), what about having telling the seller that he has the right to sell the property up until a given date (on you are comfortable with) and that he can ‘buy back’ your contract for, say, $1000 if he gets a better offer.
If he DOES get a better offer, before you have a buyer, you walk away with $1000 (or $2000, or whatever you agree upon); a bunch of new leads from having worked on it, and a happy seller.
The likelihood is that you will sell it before he does, but he may be comforted by the offer.
I think this is one B. Bronchick mentioned in a recent seminar. Not original by any means, but sounds like it might make sense to your seller.
Here’s the deal . . . title and escrow, through no fault of your own, ain’t gonna be ready by the 15th.
Market it like crazy between now and whenever and if it’s as good a deal as you think, you’ll likely have enough time to get a buyer in place prior to getting the call to come down and sign.
Go ahead and dip into he IRA, then continue to try and sell it. When it sells, put the money back.
this way, you get the deal, and perhaps make more.
Make it a wrap or AITD or something…I don’t know, but something will sell it quick and make you more money I’m sure.
You’ll at least have more time to figure it out, once you close.
And who knows, maybe you’ll have a buyer by the 15th!
You may be able to close on your deal the same day or next!
just my “somewhat new” $.02,
Jim IL
Create a second mortgage and sell it for $10,000. Contact one of those “I BUY NOTES” people out of the paper and ask them what the mortgage would need to look like for them to buy it. They’ll tell you.
You assume the first, you create the second and give it to the seller, which he sells to the note broker for cash, and he takes back a third for the balance.