Seller Financing - Posted by Greg

Posted by Stacy (AZ) on March 07, 2001 at 23:34:03:


Seller Financing - Posted by Greg

Posted by Greg on March 06, 2001 at 13:51:27:

I have a seller with an abandoned property that he bought for 11k three years ago and just got started on it when he got a good job with DOW. He owes 1,100 in back taxes, wants 2k for it to get it out of his hair.

I am getting it under contract this afternoon @ 4 for 100. My question is how to best max my profits.

I am thinking that I will market it to my investor list for 20K with seller financing, 8k dwn, balance 12k due in 3 months when repaired and resold.

Repair est 15k ARV is 45k, house across the street just sold for 53.5k last week.

Sound right? Has anyone done this and what sort of objections should I expect from rehab investors?

Suggestions or comments will be appreciated


Re: Seller Financing - Posted by Greg

Posted by Greg on March 06, 2001 at 18:42:54:

Thank you all.

How would I structure this on a handyman Paul?

Maybe Ron is right given that local mortgage rates are starting to go up.

Keep the suggestions coming. I start showing it tomorrow evening.


Re: Seller Financing - Posted by Ron (MD)

Posted by Ron (MD) on March 06, 2001 at 17:18:19:


I’m a rehabber and I wouldn’t touch this deal…for a couple of reasons.

Most importantly, you’re hoping to sell this house for $20k, the house needs $15 in repairs and the ARV is $45. You are hoping to find a rehabber to take this deal with a $10k spread to cover his profit, transaction and holding costs, and finance costs (for his repairs). The only rehabber who would take that deal is a contractor who needs work and isn’t real bright.

The second reason I wouldn’t do it is admittedly irrational, but real. You are looking to take an $18k profit, leaving less than $10k for the rehabber…who is doing considerable work (fixing and selling) and taking considerable risk. If you assign the contract, which is a bad idea here, that differential will be very evident to your buyer. If you don’t assign it, you have to hope that your buyer doesn’t sniff around and find out himself what you are paying.

Also, I would never take a 3 month balloon. I love to turn a house in 3 months, but (for me, anyway) 4-6 months is more typical.

I agree with the other poster (below) who suggested that you be happy with a $5k (or so) profit and flip it to a cash buyer. I would grit my teeth at your quick profit (jealousy maybe?), but I would probably do it. You are better off with a cash buyer.

Ron Guy

Re: Seller Financing - Posted by Paul H

Posted by Paul H on March 06, 2001 at 17:09:33:

Hi Greg,
Sounds like you have a great deal. To make it more attractive to the investors buying your deal. I would suggest you use a 20yr term on your seller financing, instead of using the baloon. Then sell your mortgage at a discount. Good luck
Paul H

Re: Seller Financing - Posted by Paul_MA

Posted by Paul_MA on March 06, 2001 at 14:32:01:

When you put it under contract with the present seller, use your ‘and/or assigns’ clause.

Show it to as many investors as possible.

First one to put a check for the full amount, maybe 5k above what you’ve got into it, TAKE IT.

Re: Mortage rates going up? - Posted by Stacy (AZ)

Posted by Stacy (AZ) on March 07, 2001 at 11:24:40:

Hi Greg-

You say local mortgage rates are going up? That’s a surprise to me. Where are you located?

Here, rates have been going down. For example, a 30 year fixed Owner Occupied is going for 6.5 + 0 points, at 6.6 APR.


and / or assigns - Posted by Brad S

Posted by Brad S on March 06, 2001 at 15:04:48:

My understanding is that ALL contracts can be assigned unless specifically stated to the contrary within the contract. Check your state to make sure. But this may work with a private motivated investor, although a more sophisticated investor or institution, may not be so aggreeable to the idea.

Therefore, just leave the and/or assign’s out as long as there is nothing in the contract stating it CAN’T be assigned

Re: Mortage rates going up? - Posted by Greg

Posted by Greg on March 07, 2001 at 22:59:20:


They are at 6.3 all the way to 6.8 The first of Feburary the better deals were at 6.1