Hi Dan:
If you structure your professional “aid” in such a way as you are only charging for the contracts and for consultation, I can’t see getting nailed for stepping out of bounds.This is exactly what all those FSBO comapanies do that charge sellers for advertising, signage, consultation, etc. As long as the seller is paying for the ads and digging up prospects, I really don’t see the problem…I could be wrong, though.
I think you’re right: in the best of worlds you could assign the contract over to someone. But you’d still be on the hook to perform at some point, unless you had a totally open arrangement with the seller. In other words you could say, “Hey, if I move the home, great: if I don’t, you get it back”.
Seller calls me on my ad. She feels desperate. I am new at this, but I know it’s not a deal for me. No profit in it but she wants me to call her back tonight with options.
1 bd/1 bath condo
bought 7 years ago, owes 42,800
listed with agent until end of July
for 52,900. She has been trying to sell this property for 3 years. Has used three different realtors and tried on her own. She would like 50,000 but I know she’ll take lower. She owns a lot that she wants to build on. She has a trailer on the lot that she can move into. She needs to get out from under the mortgage in order to build.
A condo next door is listed for 54,900 and has 200 more sq ft. They are also offering to pay closing closts. Location is three miles from a major university. Complex is a mix of students, and families. It’s an apt. conversion. No amenities. Individual air conditioning unit with w/d hookup in basement. Best comp I could find was a similar condo in 1998 that went for 50,000. A unit in her complex that was trashed and bank owned went for 16,000 and change in 1999. Rents in the area go for 650 a month. Could a lease/option work here? She had a young man interested but couldn’t get mortgage approval.
I really don’t know what to tell her.
Thanks, I appreciate any advice.
And what is the monthly HOA fee? Is there really cash flow here? And if there is a little, does the HOA have reserves? Do we see exterior painting or a new roof for the complex on the horizon with an increase in dues and/or a big assessment? Just be careful.
In addition to the lease option, why not tell her she can deed it to you subject to the existing mortgage. You could agree to pick up the monthly payment when you place a tenant/buyer in the property. Her problem is solved because she gets her mortgage covered and you pick up some equity and probably a monthly cash flow.
I appreciate your suggestions. I will suggest the lease/option and try to collect a fee for setting it up. She just wanted desperately someone to give her some advice. Thanks again.
I may be out of line, but could you not purchase the condo subject to the underlying financing, then lease it to students, if it is near a university? There was a thread a while back on renting to students with lots of good advice, mostly having to do with getting the parents also on the hook for the rent. If you could take it over for what she owes, and rents for $650, then I’m guessing it would cash flow around $200 bucks a month. Not bad if you can get in for nothing down. Either that, or a very long term (5 year) lease option. Anyone else with thoughts on this?
You’re right: this would not make a good investment. But how about offering to help HER set up a lease/option? She could advertise the home as a “RENT TO OWN: NO BANKS!..ETC”. You could provide her with the contracts and even do the tenant screening and charge her a flat fee. This would be similar to those FSBO services that charge a fee for assisting sellers wishing to do a FSBO. There is no commission, and you wouldn’t be finding her a buyer anyway, so I don’t think you’d be treading on the realtor/investor line.
Would this condo fly as a lease/option? Have her put a test ad in the paper to find out. If she gets a great response then she can engage your services to help with the transaction.
One of the problems your seller might be having in moving the condo is that it is a one bedroom one bathroom unit. Most people want a two or three bedroom place along with at least another half bath. In my market you can’t give away a one bedroom condo.
Also you mention that it is an apartment to condo conversion with no amenities. Often these projects are all cut up and still look like tired apartments. The no amenities can be a selling problem, as the unit would be competing with other condos that DO have amenities.
These are some reasons why the bank foreclosed one bedroom went for $16,000. I don’t see a deal here. Clue its been on the market for three years.
aren’t you treading really close to practicing Real Estate Law without a license if you do it this way. Just a formality, but I would setup a Lease/Option that is assignable and then assign with my seller’s approval. it may help keep you out of jail.