Need Creative Options on this one... any ideas? - Posted by Harley-CA

Posted by BillW. on January 29, 2001 at 23:03:17:

Harley, Here’s an idea for you. Since it seems like there’s little chance of this seller selling quickly, why don’t you offer an option on the property and also give the seller the right to continue to sell it at the same time. If the seller sells it first (unlikely), you will not have lost any money other than the minimal option fee and your advertising for a new lease purchase buyer. If, however, you find your buyer first, exercise the option,close and have the new buyer in the next day. Just do it like a simultaneous closing and have your buyer come in first (their deal will, of course, be conditioned on the first seller actually closing and the financing you want going through). Net result, you controlled the property with almost no cash and with no penalty or neg. cash flow until you found a buyer. Your only risk would be if the seller actually found a buyer before you.
Good luck,

Need Creative Options on this one… any ideas? - Posted by Harley-CA

Posted by Harley-CA on January 29, 2001 at 20:12:00:

Hello again everyone. I have a seller who has the following scenario:

Custom home (2 br 2 ba) appraised at $313k (build 1960)
Upgraded in 1995 (very nice work done)

Seller wants to sell it for $230k, which will pay off the underlying 200k loan and he will carry the 30k in the form of a note.

Here’s his problem:
he existing loan is hard money due in a year

the payments on this loan are outrageous

The area comps are newer, bigger, more bedrooms and are priced at around 240k!

The home has been on the market since September with very few bites. By the way, it is a lakefront property.

The rents in the area would only support about $1200 per month max (not enough to cover the payments on a 30 year note if the property were deeded to me and I were to refi at 80% of the appraisal value which would be $254k and the P&I alone would run around $1800 per month.)

My recommendations are as follows, tell me what you think or what you would do differently.

1.) Take property off sellers hands by getting the deed, refi’ing the house to pull out enough to cover the existing, any prepay penalties and closing costs on new loan. The home’s appraisal will support taking out much more money but that’s would lead to a serious negative flow. Then, I would simply let the seller walk away with his credit intact (he doesn’t qualify for a refi because he’s not working or doesn’t have an income). Then, after refi’ing the house, I would have a payment around $1468 per month. I would then lease option the property for $$1600 per month with an option consideration of $5000.

Problem is, if it sits on the market for any length of time, I’ve created a monster!!!

What would you do in this situation? This one’s gonna take some serious creativity!

The upside is the appraisal value of the home (it’s a really nice home). The downside is that the market for this type of home seems to be in a slump due to newer homes in the vicinity.

Looking forward to hearing from the chorus of great creative investors here. How do we solve this seller’s problem? Don’t ask where the property is located (smile).


Need Creative Options on this one… any ideas? - Posted by JohnBoy

Posted by JohnBoy on January 29, 2001 at 23:25:29:

With newer and bigger homes in the area comping out at $240k says to me that this house is over appraised at $313k! What would make this home worth $313k when bigger homes are selling for $240k??? You need to find out what this home is really worth. Is this home on the water where the other aren’t? If so, can you find any comps on other water front homes that have sold?

Other than that, I think Bill has the right idea.