Posted by Bill Gatten on March 04, 1999 at 18:59:33:
First of all, don’t get caught up in sellers’ pipe dreams. Their expectations are seldom real. The lady just needs a knowledgeable investor like yourself to comfort her in her time of need.
Look at it this way: If the property is really worth $140,000, you know she’d accept $135,000 or less (probably a lot less); and by the time she’s paid all the Costs of Sale (commissions, closing closts, etc.), she’ll end up with $120-125,000 at best. Then she’ll pay off the loan and walk away with $15-25,000 (if she’s lucky)…with income tax of $10,000 or so due on that: netting out maybe $5,000 to 15,000 after tax, in lieu of the $40K she’s salivating over.
Wouldn’t she better off to refi for 85% of the $140,000 ($119,000); pay off the first, let you take over the payments on the new loan; then carry the remaining equity for you at, say 8-10% interest-only for a couple years? You might even show her how to discount her 2nd at 50% (or so), so she could end up with maybe $30,000 over all, instead of the $15,000 she’ll have otherwise.
Then if the good lady has any trepidation about DOS violation, turning the title over to you, your financial wherewithall, etc… there are ways around that too.
If she still balks… whack her with a wooden mallet, and get on to your next deal.
Hope this helps.