Posted by Lori Samson on June 08, 2000 at 13:58:35:
As we speak I have sellers of a house that the numbers are very similar. They are going to build, but in another State. I have it tied up under contract and they will have it refinanced soon. They are then going to wait until Sept. before they move out. That gives me loads and loads of time to find a tanant buyer that will put down plenty! I want the cash flow on this one because it is 300 amonth and I get a nice rent credit too. I won’t be too terribly concerned who moves in if they have Cash! The sellers are elderly and are not concerned about getting it to closing because they will have a big chunk of their money from the refinance. It is true that not every one that can refinance, will. Lori
Posted by Cassie (GA) on June 08, 2000 at 09:04:56:
Hello everyone,
I have a FSBO house FMV(based of appraisal)is $102,000. Owner asking $102,000 and has informed me she is open to hear about a lease option deal but would NEED 10-15,000 to have her new house built (she would move to apt until completion of her new house). This would be my first deal and I want to approach her with answers to most of her questions. How could I L/O the house and get her the 10-15,000 she is requesting? Matter of fact is this even a deal? I think I understand that if the owner is flexible on terms than if the asking price is within reason they could get their asking price. Would I create a note for the 10-15,000 than sell it? How does that work?
First of all what is the existing loan balance? How much equity is there in the property?
If there is a lot of equity, i.e. $50,000 1st loan, you can get a hard money loan for $15,000 (65% LTV) and have the seller carry back a 3rd of $37,000
Or you could locate a note buyer, determine the parameters of a note that he would be willing to buy, then Create a note in escrow and Sell to the note buyer .
Again the seller would have to carryback a 3rd loan on the property because the note buyer will want some protection.
I have found that a seller that wants to build or buy a new house is one of the least motivated sellers. Their expectations are too high. They will stay where they are at until they get their price. They get motivated only once they have made a decision and have two house payments. To make money you have to have it a little below market. Even the 6% they would spend on a realtor would be nice. To make a true L/O a good deal you need them motivated and you need to get in with little money.
Having said that, you may still solve their problem by getting them to put a small loan like suggested. Or you could find someone with personal or IRA funds that would like a return better than CD rates. Whether it is a second on the new house or a loan on the old house would have to be determined. There is a world of difference if the existing house has a 80K first mortgage or is free and clear. Since you did not mention an amount owed I will take it you did not ask the question. To be able to help solve their problem it is something you would need to know. If it were free and clear you could put a new 65% first that would get them their cash and have them carry a second of 35%.
Maybe they have an IRA with 15K in it that they could use to buy a mortgage you have or create on a property. Then you would have the money to put down on their property with owner financing or as option consideration.
The reality is, you can’t work a lease/option deal with someone who needs that amount of cash now. However, meet with her anyway for the practice of negotiating, She may not necessarily “need” the cash right now.
I agree, the seller is not likely to be that motivated.
If the property is free and clear it would be easy if the the seller will take back a 35% loan behind a 65% hard money loan.
A few weeks back I was working with two Sellers who were considering a L/O, but had lots of equity in their homes. A few folks recommended that the Sellers refinance to pull their cash out. I tried this unsuccessfully with both Sellers – true, this is not a statistically valid sample size.
In theory, this should work. As a practical matter, I’m not sure if does. I’d love to hear from folks who have done this.
I actually did this as the seller a few years back. I was relocating, needed to sell quick and needed cash to buy a new place. It worked just fine and my tenant-buyers exercised their option within 6 months and I was cashed out.
NOTE: I was a) open minded and b)relocating and c) therefore motivated.