Re: motivated seller needs a Doctor of Solutions - Posted by JohnBoy
Posted by JohnBoy on January 14, 2001 at 02:16:21:
The problem here is with the seller wanting to stay in the house. After a year or two the seller decides to change their tune and thinks they should be entitled to the equity in the home. You are the owner, but you leased it back to the seller because he was in financial trouble. He decides to fight this in court and claims you were taking advantage of him while he was down. The court could reclassify your deal as a loan and cause you all kinds of problems. You don’t need any problems!
Find the seller another house to move into that he can afford! Take his house over “subject to” the existing mortgages. Then you sell the house on a wrap to another buyer on contract for deed.
Use the downpayment money from your new buyer to place the seller into another house if you have to!
Is the seller current on all his payments with both mortgages? If not, how many payments is he behind on each one?
Another way to do this like Ed was saying is IF you could find a lender that would refinance you after you take title to the property. Once you took title as the owner you refinance the property at 80% LTV. If the property appraises for $150k, this will get you $120k as a new first and pay off the two underlying loans, leaving you with $15k minus costs for refinancing. That money would cover the difference you need to carry the seller for two years while he rented at $1000.
I just don’t like renting back to a seller that is distessed and have to worry about dealing with any potential problems later should the seller change their tune and think they are entitled to something more later on! If you went this route, I would only agree to this by leasing the property to someone other than the seller, giving that tenant the right to sublease where they were renting to the seller and not you! Keep it at arms length as far as possible. The seller could use a relative or a friend to step in and sign a lease with you in place of the seller and they rent the house back to the seller by subleasing it to him!