Possible first deal--Advise please - Posted by Ted Trunnels

Posted by Ted on February 25, 2001 at 17:10:13:

Thanks for your input Mike.
The amount after refinance is 153K. I’m trying to get in before the refinance takes place to give me a larger spread between incoming and outgoing payments on the sandwich lease. I definately will get the memorandum recorded to protect myself.
House needs almost no repairs. Touch up paint at most. This house wouldn’t last long on the market, so I’m doing all I can to get a signed contract ASAP.
Thanks again.

Possible first deal–Advise please - Posted by Ted Trunnels

Posted by Ted Trunnels on February 25, 2001 at 02:18:20:

This is the situation. Seller lost his job and can’t afford his payments any longer. He is in the process of getting a refi, but because he is unemployed, he is getting a 2.5% increase in the interest and only getting about 30% of his equity out. He is supposidly going to be using this equity to make his payments in the future.
Here are the numbers:
Loan balance - 131K (before refi)
New appraisal - 201K
Current Interest rate - 7
Refi rate - 9.5
Payments - 1200.00/mo
Desireable home in a nice area where most homes are appreciating at about 6% a year. Seller was trying to sell his home himself, but buyer backed out after he started refi process to pull out equity.
Seller does not want to fall behind in payments and is thinking he will have to relocate to find work.
I’m thinking of a L/O deal for him.
Instead of a fixed 9.5% fixed refinance, would an adjustable rate be better and or easer for him to qualify for so he can have some of his equity now and the rest at closing. Discouted purchase price of course.
Any suggestions would be greatly appreciated. Would definatley like to get one under my belt before Atlanta!
Thanks, Ted from Reno

Re: Possible first deal–Advise please - Posted by Mike C

Posted by Mike C on February 25, 2001 at 16:29:56:

Ted -

A few questions first. What is the loan balance after the refi? You mentioned 30% of his equity, so I assume that the loan balance is now $152k ($201 - $151 X 30%). If he is truly motivated, then a lease option might be the way to go if you can swing the monthly payment, get a fat credit to purchase price, and get an option price equal to his loan balances. Be careful, if he’s in trouble there is a chance he’ll further leverage it later and increase the mortgage balance to greater than your option price creating a problem for him and a nuisance for you. Make sure that you record a memorandum of option, which may prevent this situation. My comments assume that the property doesn’t need much work, you can sub lease it and/or sell it quickly. Good luck - hope you have it wrapped up for an Atlanta success story.

Re: Possible first deal–Advise please - Posted by Lisa in VA

Posted by Lisa in VA on February 25, 2001 at 22:07:09:

Considering this person is unemployed and might have to relocate to find work what protects the buyer from creditors attaching liens to the property during the term of the L/O?