More Details On That $86K House Bought For $21K - Posted by LJQ

Posted by FLA on December 08, 1999 at 17:57:38:

The hard money loan is based soley on the perceived equity in the property after it’s repaired. Some Lenders will fund the whole shabang : purchase price , repairs, and closing costs. If she plans to live there or rent it out she could refi in 12 months. The LTV of the refi loan would be based on its appraised value (after 12 months, if less than 12 months the LTV is based on the selling price). That would be an easy slam dunk refi - even if she has rough credit.
No need to use her own bucks. If the deal is good enough I say leverage the whole shabang ( I guess I like that word). Good Luck

More Details On That $86K House Bought For $21K - Posted by LJQ

Posted by LJQ on December 08, 1999 at 14:46:42:

Hello All!

Thanks for all the replies to my original posting. As promised, here is more info on Helen’s $21K house.

She got this house through a HUD auction and it seems to be the one that got away for a lot of people. She gave me a copy of the contract and the agreed purchase price is $21,252.

It did indeed sell for $86,000 on January 20, 1998.

The sale shall close no later than 45 days from November 22, 1999.

I have a call in to the Building Dept in the city to see if there are any Code Violations that they know of…they are calling me back when they are less busy. If I was a betting man I’d bet I’ll never hear from them again!

Letter I under conditions of sale state: “Purchaser and Seller agree that this contract shall be binding upon their respective heirs, executors, administrators, successors or assigns but is assignable only by written consent of the seller.”

I have a call into some company in Blue Bell, PA to find out how that works. Helen has not gotten a return phone call from the broker handling the sale. I’m not sure she COULD flip the contract to an investor according to HUD rules.

The house needs a new front porch and a good paint job…Helen and her boarder say that the previous owner had been working to remodel and the kitchen is gorgeous. Obviously neither I nor they have any way to judge structural soundness but one would think in 24 months not TOO much could happen, particularly if the previous owner was trying to remodel. It’s in a good neighborhood, one near a hospital, across the street in fact.

Now this is interesting…the HUD contract says ROAD but I know it’s on a STREET and there is no such ROAD in the city. Could that cause a problem?

Helen’s first choice at this point is to borrow the $11,000 she needs to complete the sale. She has $10,000 in savings. Her disability income provides her only $685 per month and the debt ratios just don’t work out. She currently pays $450 a month in rent which is aided by her two boarders, who will move into the house with her.

Her thinking is obvious…they are loaning only $11,000 on an $80K house. I explained to her that it’s still a risk because if the lender has to foreclose, it’s a hassle, it takes a long time and you may wreck the place on your way out.

Taxes on the house are. approx $275 per month.

She will also consider assigning the contract if all else fails.

I’m wondering if there is a way I can help her get into this house and make a few dollars myself. If you saw where she lived now, you’d want to help too!

You now have all the details I do.

Any suggestions would be appreciated.



Re: More Details On That $86K House Bought For $21K - Posted by GL

Posted by GL on December 10, 1999 at 19:04:08:

If she wants to live in the house how about finding a silent partner or investor?

Say "Mr. Investor if you give me $21000 I will give you a half interest in an $86000 house.

I will live in the house. I will pay ALL bills, taxes, insurance, repairs etc. I will keep the house clean and in good repair at no cost to you.

If we sell the house we will split all profit evenly over $42000.

This is a long term investment. We will keep the house for 10 years. At that time we will decide to either keep it or sell it. If you wish to sell I reserve the right to buy your half, for a price based on an independent appraisal.

Or we can sell out at any time by mutual agreement."

Is that a good deal for the investor? An immediate DOUBLING of his investment plus long term appreciation with no expense or management hassles?

Is it a good deal for your friend, a FREE house for 10 years, by giving up half the appreciation? Plus she gets to keep half the profit if they sell?

Re: More Details On That $86K House Bought For $21K - Posted by Dave T

Posted by Dave T on December 08, 1999 at 23:21:23:

While HUD may not approve a contract assignment, there is no reason why Helen couldn’t do a simultaneous close, if she is able to find a buyer that can close on the same schedule as her HUD contract.

If so, then all the funds Helen would need for settlement would come from her buyer.

Just a point for clarification, in my market area HUD gives us 60 days from contract acceptance to complete settlement when we win a sealed bid auction.