Posted by Jim Beavens on June 02, 1999 at 13:20:50:
A couple thoughts from this newbie:
Have you been in touch with the holder of the 2nd mortgage? Is there any way you could work an extension? (who knows, maybe you’re dealing with a John Behle student ;). Maybe you could pay half or a fourth now and re-amortize the rest. Perhaps prepaying 6 months payments might grease the skids a bit and not only allow an extension, but for you to take the property subject to the loan. Alot of this is easier if the note holder is a private party, but it never hurts to ask regardless.
If he’s as motivated as you say, then just offer him the $59K to take care of the mortgages, especially if you have to come out of pocket for all or part of that $12K. Forget the $8K due in 5 years. If price is that important to him, then you can throw this in later, but I’d start at $59K.
If you have to come out of pocket for more than $3-4K for that second, then forget L/O. The only way you’ll get much more than that from a buyer is if you owner finance or sell on contract. There’s nothing wrong with coming out of your own pocket as long as you’ll immediately make it back upon finding a tenant/buyer.
Here’s the way I see this deal working:
Contact the second mortgage holder and see if there’s anything else he’ll take besides $12K right now.
Take title to the property in a land trust, subject to the first and second mortgages (assuming the seller doesn’t mind having the mortgage(s) in his name…and he might mind now, but call him back on June 29th and ask again).
Sell on a wrap at 5% over FMV. There should be a nice differential in payments based on your equity.
If you have the money available, you might consider just paying off the $12K if there’s no other alternative. This will limit your pool of buyers to those with at least 15% or so to put down in order for you to recoup this, but that isn’t entirely unreasonable. You won’t get much front-end profit, but like I said there should be a nice spread in the mortgage payments.
Disclaimer: As rayrick would say, it’s entirely possible I have no clue what I’m talking about. But hopefully this gets your wheels spinning again.