Posted by Remye on March 18, 2001 at 15:29:40:
Yeah I can just hop in the jeep and drive home, I just wanted a couple thousand to put down on a place when I get there.
need help with personal real estate problem.(long) - Posted by Remye
Posted by Remye on March 18, 2001 at 10:43:21:
Hello, I’ve been following the board for sometime and have thoughly enjoyed the posts. I now have a problem and I need help on figuring a way out. Let me explain…
I moved across the country with my girlfriend in june of 99. I was only 19 years old, she only 18. We will have been together for four years in october. Everything was going well, so we scrimped and saved till we had enough to purchase a home, a home which one day we could raise a family. Well last year on july 27 we bought our home, a beautiful new 4 bed, 2 bath, 2 car…you know the american dream. The lender was scetchy abouty funding the loan so my girlfriend asked her father to cosign, which he did. He also lent the closing cost so things wouldn’t be so tight. Any ways the past six months have been tough on my girlfriend and I. She tells me last night that shes not happy any more and she wants to end the realationship. To tell you the truth I don’t know what kept the women holding on so long. Any ways the question is what can we do with our home? My girlfriend, her father, and myself are on the deed, how can I just walk away? She and I are the only ones who pay the bills on the home, so her father is just on the deed to get the loan through.
Here are the details of the house
mortgage balance- 110,000
comps in the division are runnning-118,000\122,000
piti-950 per month
I was thinking of doing a l/o on the home Which I think would be fair. I could get at least 4,000 down maybe 6,000
we could split that and have enough to go our seperate ways We would then have monthly cashflow we could split of about 100-175 per month each. And then we would make a nice back end profit as well, given current appreciation in two years the home would be worth 130,000-135,000. The problem is she doesn’t want anything to do with a l/o she says its to risky. She’d prefer to list with a realtor. I tryed to tell her a realtor’s commision would eat any equity we had, which is little. Are there any other options for us?
Thanks for the advice during this trying time.
Sincerely
Remye
Thank you all!!! - Posted by Remye
Posted by Remye on March 18, 2001 at 21:27:30:
Thank you all for the advice. I’m not sure what will happen, I just wanted to say thank you and you are appreciated.
Thanks
Remye
Help with personal real estate problem - Posted by Carmen_FL
Posted by Carmen_FL on March 18, 2001 at 17:58:33:
Although I can’t tell you what to do re: your relationship, could it be that the house is the one creating the strain, and getting rid of it would allow you and your girlfriend to get back on track? I’ve been there, so I know what money problems can do to a relationship - and it would be very sad to have yours end just because of this.
In any case, getting rid of the house and protecting your credit and your girlfriend’s and your girlfriend’s father’s, and even making some $$ up front seems to be the order of the day. You should consider a PacTrust. It will accomplish the same thing a Lease/Option will, but it will protect you, your girlfriend and her father; it will ensure, as much as can be ensured, the prompt payment of the mortgage until the house can appreciate a bit; it will allow a buyer to get many more benefits which will convince them to pay a larger monthly payment; and it will allow all of you to go on your way to a large extent if you so choose, since a third party (trustee) will be managing the process for you. It will also entice a buyer to pay a little more for the house, and to pay more up front than a regular lease/option, as well as allow you to split any future appreciation. Also, from my (limited) experience, you can probably find someone within a week or two to take over payments. That’s been our average in finding buyers. You should look into it - it sounds like a perfect fit here. I’m no expert, but if I can help, e-mail me or look for one of Bill Gatten’s posts I’m sure he’ll be glad to talk you through it.
Here’s another idea - Posted by B.L.Renfrow
Posted by B.L.Renfrow on March 18, 2001 at 12:28:52:
You could offer it for sale with owner financing.
You structure a note with your buyer, based on negotiated sale price, cash down payment, and the buyer’s credit history. That note can then be sold at closing to pay off the present lender.
Here’s an example: You locate a QUALIFIED buyer (that’s the tough part). Since you’re offering terms, you can command a higher price for the house than with a cash sale. Let’s say the sale price is $122k. Your buyer has a $12k cash downpayment. Let’s suppose your note could be sold with an 8% discount. That’s $122,000 minus $12,000, which leaves $110,000. $110,000 minus 8% discount equals $101,200. When you add the buyer’s downpayment, you have $113,200. Subtract the outstanding mortgage balance of $110,000 and you have $3200. If your seller pays closing costs, that’s enough to move back across the country.
There are, of course, all kinds of factors which could skew the numbers one way or the other. Depending on your location and your local RE market, it might or might not be realistic to expect to find a buyer with 10% to put down. And, note sales are not as easy as they used to be. Buyers generally have to have pretty decent credit, or the discount would make the deal unworkable. But the advantage is this: since you’re offering terms, the sale price can be higher (though the property still needs to appraise for the higher price) and you’ll locate FAR more potential buyers, just with the words “OWNER WILL FINANCE.”
Even with the discount, you could still end up with a larger net profit compared with selling through a broker and paying their commission. BUT: it’s not easy, and you’d likely need some assistance, and it’s a lot of work. But something to think about perhaps.
Brian (NY)
Re: need help with personal real estate problem. - Posted by Ed Garcia
Posted by Ed Garcia on March 18, 2001 at 12:11:09:
Remye,
I agree with Jim Piper, sell the house. Your father-in-law co-signed on the house to help his daughter get a start in life. It didn’t work out. If you try and keep the house or sell it on a lease/option, the father-in-law is still on the loan. He is not going to be a happy camper watching you try to make a profit on a house that’s in his name and is a liability against his credit and borrowing power.
Remye, you also mention that your wife is hot and cold on your relationship.Remember she is young, that may be some of that may be because she feels guilty for putting her farther in such a position and is trying to work it out for the wrong reasons.
I would talk with your father-in-law and let him know that you want to do the right thing. Try not to burn any bridges and leave the door open, allowing yourself the opportunity to either reconsider the relationship or sever it in a dignified manner.
I’m sure you’ll do the right thing,
Ed Garcia
JPiper and Phil… management company? - Posted by Remye
Posted by Remye on March 18, 2001 at 12:02:20:
Jpiper and Phil,
Thanks for the input.
I have one question. Have you ever used a management company to manage l/o homes? Since I’m moving far away this may be a viable option to get some quick moving cash, (small) cashflow, and higher sells price. Plus I can avoid the dreaded real estate agent commission.
Your thoughts?
Re: personal real estate problem - Posted by JPiper
Posted by JPiper on March 18, 2001 at 11:15:59:
If the relationship is truly ending, then I think it would be in everyone’s best interest to dump the place, thereby severing all forms of relationship.
Continuing on with the house places her and her father into an ongoing relationship with you regarding this property and whatever may transpire with it. This means further opportunities for problems and issues to arise.
Why??
You can go do the real estate business without this house. Trust me. And you certainly don’t need to take two other people down YOUR road with you, when they probably don’t share the same ambitions.
Dump the house. Get everyone out of the deal and out of the loan. If there’s no money left…so what? Go make some.
JPiper
Re: need help with personal real estate - Posted by phil fernandez
Posted by phil fernandez on March 18, 2001 at 11:01:29:
Sounds like whatever you do, you will have to do it with the blessing of the girl’s father as he is not only on the deed, but also I imagine, he’s on the mortgage too.
I wouldn’t necessarily count on future appreciation happening. I would not base my decision on the appreciation factor. The way the economy is starting to look, there may not be any appreciation.
You are correct in saying that any equity that you have will be eaten up with the realtor commission. I’d do a lease/option to get a few thousand up front so you can both make your next move and to have income coming in to cover mortgage and tax payments.
Re: Here’s another idea - Posted by Remye
Posted by Remye on March 18, 2001 at 12:34:29:
Thanks for the idea, haven’t thought of that one yet. Something to definitely think about though.
Thanks
remye
Re: need help with personal real estate problem. - Posted by Remye
Posted by Remye on March 18, 2001 at 12:41:12:
My girlfriend and I are under alot of stress. Shes taking 24 credit hours at two colleges works 30 hours a week at a preschool, and shes a tupper lady. Shes simply incredible, I really admire her strength. But her path in life is tearing us apart. I’m not helping the situation either I work 7 days a week trying to make ends meet. Sooner or later something has to break and it will probably be our relationship. So we are left with the burden of the home, that neither one of us could afford on our own.
Thanks for the input Ed, and for the offer to speak with her father. Hes a very intelligent man who would probably be willing to strucure a win-win-win deal for us all…its all about cooperation.
Thanks
Remye
Re: JPiper and Phil… management company? - Posted by Dave T
Posted by Dave T on March 19, 2001 at 08:07:44:
A property management contract would probably have a sales clause stating that if you sell the property to your tenant the management company will be entitled to a sales commission.
Re: JPiper and Phil… management company? - Posted by phil fernandez
Posted by phil fernandez on March 18, 2001 at 14:57:05:
A management company will probably skim any monthly cashflow profit from you. They usually get around 10% of the gross rents collected.
Many management companies should actually be called MISmanagement companies.
By offering either a lease option or owner financed deal you shouldn’t need a realtor to find a prospect. Likewise if you structure the lease option properly, the tenant/optionee would be responsible for those annoying small repairs and the monthly checks would be sent to you and in turn you would pay on your underlying mortgage. So no management company would be needed.
I also liked Brian’s idea of offering owner financing and then selling the mortgage at the closing table. By doing this you are completely out of the deal.
Good luck.
Re: personal real estate problem - Posted by Remye
Posted by Remye on March 18, 2001 at 11:25:00:
JPiper,
Thanks for the input. I’ve thought about saying just forget, sell the house and move on. The thing is I need money to move on my seperate way. Like I said I’m a long way from home. I want move back there and do rei, I think it would be a great place to get started (slower market, foreclosures, fixers, lonnie deals, and alot less competition).
Thanks for the input.
Remye
Re: need help with personal real estate - Posted by Remye
Posted by Remye on March 18, 2001 at 11:07:55:
Thanks Phil,
I am worried about appreciation not going as planned. But a l/o seems as the only viable plan that will help us now and in the future. I am also worried she may use the home as a way to keep us together (she changes her mind and attitude every fifteen minutes), what options do I have if she refuses to let the home go?
Thanks in advance.
Remye
Re: Here’s another idea - Posted by Bud Branstetter
Posted by Bud Branstetter on March 18, 2001 at 21:47:28:
Selling with a note is very credit dependant. If they have a good enough credit score for the note buyer to do 90%ltv then a lender could probably get them 95% or more financing. If the prospect does not have so good a credit score then the note buyer only wants to do 80% LTV. Either selling the note or getting a new mortgage do take some time and incur some expenses. The Pactrust is definately quicker and cheaper. Let us know how much cash is needed out of it to make everyone move on with their lives and we can give further guidence.
Re: personal real estate problem - Posted by JPiper
Posted by JPiper on March 18, 2001 at 11:33:04:
Even more reason to dump the place. If you’re leaving the area what happens when and if the deal goes sour? Who will take care of it? When you lease/option a house the deal is not over…the tenant may move, the tenant may not pay, the tenant may damage the place, etc etc.
If you need money to move on, get another job…save some moving dough up. Don’t get into a position with this house where it can damage either your credit or your girlfriend or her father’s credit. And that’s right where you’re headed.
JPiper
Re: need help with personal real estate - Posted by phil fernandez
Posted by phil fernandez on March 18, 2001 at 11:17:54:
Another technique you could use would be a contract for deed. You might be able to generate a few thousand more upfront and by offering terms you should be able to bump up the sales price a bit. With the contract for deed acting more like a sale you both might feel a bit more detached from the house than with the lease option.
Remember to stress to your ex that it is both of your creditworthiness that is on the line so cooperation is key.
Good luck.
Re: personal real estate problem - Posted by Remye
Posted by Remye on March 18, 2001 at 11:45:33:
Thanks,
The input is appreciated.
Re: need help with personal real estate - Posted by Remye
Posted by Remye on March 18, 2001 at 11:20:32:
Thanks for the input Phil.