Posted by B.L.Renfrow on October 24, 2000 at 17:35:18:
First, as far as the guy having $10k, there’s nothing that says you can’t make money after filing BK, so unless he hid assets from the court back when he filed, there’s nothing untoward about that.
I’d check the guy out…find out why he was in BK and if his explanation is reasonable and verifiable, like catastrophic illness, failed business, temporary unemployment, divorce or the like, he might not be a bad risk. Also, has he established any other credit since filing? Does he have verifiable income?
Plus, the vast majority of people who file Chapter 13 never complete the payout, so if he’s that far into it, it’s a pretty good bet he’ll complete the plan.
FHA will loan to people in Chapter 13 if they have successfully completed a certain percentage of the repayment period…never can remember if it’s 60% or 75%. If it’s 60, he’s there now; if it’s 75, he’s got 4.5 months to go. So getting a new FHA loan may well be an option.
If you’d prefer to owner-finance, why not sell on a land contract? If he’s willing to put $10k down, might be tough to convince him to only L/O from you. You could always include a 2 or 3 year balloon if you want.
Extrapolating some figures from what you posted, I guess you bought the house for $72k. You said you used a bank loan…if it was a 90% NOO loan, that means you borrowed $64,800 and put $7200 down. So if you sell to the guy for $77k and he puts $10k down his principal balance would be only about $2k over your loan balance.
So, unless I’m missing something, your back end and monthly cash flow would be pretty much a wash. Your profit would be a fairly measley $2800 on the front end, and a very minimal profit on the back end, less any closing costs you end up paying.
Doesn’t sound like a great deal by any means…but guess it would beat holding onto a dog for too long. Have you already agreed on the $77k purchase price with this buyer? Too bad he didn’t come along while it was still priced closer to the $90k range.
Finally, don’t forget this guy would need permission from the BK court before signing a note with you, as long as he’s still in repayment.