Posted by JohnBoy on March 08, 2001 at 22:58:52:
Here’s a deal I did that I got cash back at closing:
Seller was in foreclosure. He had no where else to go and just wanted to be able to stay in the property. No one would refinance this guy to save his home. He didn’t care whether he owned the home or not, as long as he could stay in it and pay rent if SOMEONE would just solve his problem with the foreclosure. We agreed to help him out providing he could pay us $950 in rent! His current mortgage payment was only $650! The problem was he was 6 months behind and his lender would not reinstate his loan and even if the would, he didn’t have the money to cover all the back payments, taxes owed and another lien filed against the property by the city.
He agreed to just deed the property over to us if we would give his son an option to buy it back in a year for the appraised value. The property appraised “as is” for $100k. It needed about $5k in work done, which would increase the value to $115k. Since they were going to stay in the house we didn’t have to do any work and just agreed to lease option the home to his son at $950 per month with an option price of $102k for one year.
Once we got the deed signed over we recorded it, then immediately refinanced the property through our lender at 80% LTV. ($80k on a $100k appraisal) The total pay off on the sellers underlying loan, plus the taxes owed and the lien from the city came to $66k. Since our lender loaned us 80% LTV they cut us a check for the difference which was $14k and we had $20k in equity still remaining in the property. That’s $34k profit on this deal that the seller just GAVE to us in order to make it so he could just stay living in the home! His $950 rent more than covers our loan payment and taxes on the $80k we borrowed.
So this deal gave us $14k cash up front, $20k in equity and about $50 per month in positive cash flow! The seller was greatful we could help him out! Now that’s a MOTIVATED SELLER!