Posted by rayrick on April 05, 1999 at 09:22:55:
Karp, I want you to know that I consciously suppressed the impulse to simply e-mail you this question! So here it is for all to see.
I’m sending out postcards that say, in effect, that I’m interested in buying the seller’s house and I can give them a good price if they can flexible about the terms of the sale or I can give them all cash if they can give me a discounted price.
It’s the all cash part I’m trying to get thoroughly clear on, specifically, how much I can really offer and what I’ll do if that offer is accepted! I started a thread about the “phantom second” concept and came away convinced that this was NOT a good way of doing business. It’s fraud and what’s more, it still involves getting a bank loan which is less than ideal.
Option 1) Hard money loan up to 65% LTV. Cons: it takes a MIGHTY motivated seller, with quite a lot of equity, to accept 65 cents on the dollar, and you’ll pay high loan costs.
Option 2) Karp introduced another alternative in a thread below. Tie the property up for 80% of FMV or less, with an all cash offer. Then market it as 100% financed, setting your buyer up with a 80-20 owner occupied loan, with you carrying the 20% second. Presumeably you do a double close and get your buyer to pay virtually all closing costs. You end up with a 20% second after all is said and done, plus cash if you bought it for less than 80% of FMV (though I’m sure there are some expenses here).
This sounds very nice. So here are my questions-
How good does your buyer’s credit need to be to get this sort of loan? Can it be closed quickly? Is it a reasonable and workable plan to a) find a buyer and b) get them qualified for this type of program, all before your closing date with the seller? How much time should one allow? Do you put any kind of escape clauses in your contract with the seller in case you fail to find a buyer, or just limit your liability to your earnest money and be prepared to kiss that goodbye (along with a little of your dignity) if you can’t close?
Option 3) ???
Thanks to all in advance.
-Ray