Posted by Franklin on September 03, 2003 at 16:14:08:
I used to be a stock broker and worked margin calls on accounts quite a bit.
It’s amazing how many people have “no money” to fix their problems until you ask them for it.
not quite sure how to do this… - Posted by mo
Posted by mo on September 02, 2003 at 22:09:47:
I received a call from a guy who owes $460K on a $500K home. He’s willing to walk away immediately for what is owed, which is great… except for the fact that there is very little equit!! Because of the price range (and limited market activity in that range) and the limited equity, my initial suggestion was for him to take a more conventional route and go with a realtor. He called me back today wondering if there is any way that I would be interested. So I’ve been trying to think about a way to make something out of this and this is all that I’ve come up with…
Get an option to purchase the property in one month for 460K. During that month, try to find a buyer would take the property on a lease option. If so, great. If not, then no harm done on my end. Right? Any special paperwork that I would need for this or any issues I should be aware of?
Also, this is in the Dallas/Fort Worth area and I am wondering if anyone has experience lease optioning homes at this price range. His current payment (PITI) is approximately $4000.
Thanks!
MO
Other option - Posted by Franklin
Posted by Franklin on September 03, 2003 at 13:38:52:
If this guy is motivated enough, offer him $400K. Thats about 20% under market.
You never know, he might have enough to do the deal.
Re: not quite sure how to do this… - Posted by Brent_IL
Posted by Brent_IL on September 03, 2003 at 08:02:09:
I like Craig’s thought that “forty thousand buckaroo’s is forty thousand buckaroo’s,” but the realization of the $40K is a couple of years away when the L/O’r cashes you out. “Thinness” is a relative term. Closing costs can reduce the $40K considerably.
Gerald lives in the area, so I’d have to actively disprove what he says before I’d dismiss his counsel out-of-hand. Maybe I’ve gotten too jaded, but all I can foresee is significant effort for little up side.
I think that ten dollars for a non-exclusive option sounds about right.
Re: not quite sure how to do this… - Posted by Craig (IL)
Posted by Craig (IL) on September 03, 2003 at 06:37:51:
If a guy owed 20K on a 60K property, would you call that "very little equity’? Forty thousand buckaroo’s is forty thousand buckaroo’s.
Gerald’s right, though. You don’t want to risk much in this deal; certainly not three months of loan payments. Go ahead and offer an OPEN option (for however long a period you can get) where you buy the option for ten doillars based on price and terms, and he remains free to market it elsewhere. You market it too. So, he gains your efforts and ten bucks with no loss to him.
He may have trouble paying relators’ commision plus closing costs. Your deal may be better to him than going to a realtor.
Note that you are risking virtually nothing with the chance to make 40K. How’s that sound?
Some points: 1. Record your option. 2. Be careful how much you spend on advertizing, etc. 3. Where did the 500K value come from? How certain are you that there’s anything in this deal? 4. If this guy has money problems, maybe there are other liens or the title is not otherwise clear. It wouldn’t be worth it for you to pay to have the title checked, though, you should do a preliminary title check yourself. Make sure that any contract you write gives you an out if the title is not clear. 5. Lastly, if this guy is not able to make payments, it will take the lender some time to foreclose; perhaps you can sell it before then; though, you’ll lose some in penalties.
Re: not quite sure how to do this… - Posted by gerald(tx)
Posted by gerald(tx) on September 03, 2003 at 24:57:01:
Mo, I’m in the DFW area and there are deals like this galore. These higher priced properties are too hard to move. Try sitting with the home empty for even 3 months, that’s 12Gs!
And why would the owner consider giving you an option? Not unless you throw down some serious money which you would probably be wasting. Personally, I don’t touch anything over $150k in today’s market.
Sorry to rain on your parade, but I say save yourself some money and frustration. There are better deals in the lower strata.
Re: not quite sure how to do this… - Posted by Larry
Posted by Larry on September 02, 2003 at 23:30:59:
Mo,
Is he behind on his payments any or is he just eager to sell?
Also can you elaborate more as to what is going on behind the scenes…
-Larry
Re: Other option - Posted by mo
Posted by mo on September 03, 2003 at 14:24:47:
I suppose it is worth a shot. I often make the “error” of assuming that the person doesn’t have any money to pay me to make the deal work because they have said that they are financially strapped. It is one of those questions that makes me feel uncomfortable, but I guess I could work on that. Although he doesn’t have the equity in the house, I really don’t know about his other finances.
Re: not quite sure how to do this… - Posted by mo
Posted by mo on September 03, 2003 at 14:27:39:
I certainly appreciate your comments, especially given your familiarity with the market in this area. You mentioned working primarily with properties in the $150K range - are these properties you lease option or flip? Are you familiar at all with lease optioning higher end properties?
Re: not quite sure how to do this… - Posted by mo
Posted by mo on September 03, 2003 at 10:52:58:
He is not behind on his payments right now, but basically he owns a business that is “going under” and he is barely getting by. Wants to scale down his lifestyle before he really can’t afford it. That is all I really know about his situation.