Deal About To Go South - HELP
A single family home was going into foreclosure. An investor stepped in and started paying the mortgage, in exchange for them selling the house and him getting the profit.
I signed a contract with the investor (yes, stupid) with a 5k deposit (certified check), for a purchase price of 171,500.
Property appraised at 186,500. Needs 5k work, comps sell at 200.
First title company rejected the contract, said investor has no claim or right to sell the property. Signed a new contract with the actual owner, with the investor as the benificiary of remaining funds. Lender rejected new contract, said they don't know who this person is and why they're paying him. Signed new contract between just myself and the owners, and the owners had a seperate dispersion contract with the investor. Lender rejected new contract, said could not accept the new contract because they had seen the old one.
Property is going to public auction next week. My loan broker has a lender that can get a loan issued in 3 days, but I have to come up with another 5% down (10% down total). I can't come up with that much, that would make me need to bring 21,500 to the closing table. I asked the investor if he would be willing to lend me the money, in certified funds, and increase the purchase price so he gets paid back at closing. He wants % on the loan, and may or may not be able to come up with it. If I go to another lender/broker, it will take too long and the property will be sold at auction. I don't think I should give him % on the loan since every problem has been because of his contracts.
I'm not too worried about not getting the property. If I can't, there are other deals out there. I am, however, worried about the investor giving me back my deposit, if I cannot get the property. I really think this is going to fall through and he will not give me my money back. Does anyone have any opinion on the legality of this, and what my options are if this occurs? Do I have a right to get my deposit back, since every delay and problem has been because of his bad contracts (ftwo seperate title companies said the first one wasn't valid and thus uninsurable)?
Thanks,
Joe
A simple quick question. Why would anyone purchase a property at 200K that appraises for 186?
It was appraised at 186 before repairs. If it comes down to it, I can sell it again at 186 and still make a little profit
Are you telling me you don't have a credit card that has a line of credit for that much cash available at this moment? Call your card companies and ask them. Or ask every relative you can think of if you can borrow the money for whatever time you need it and pay them the interest. Many lessons learned here -- there are hard money lenders out there who will loan you purchase price and fix up based on 75% of ARV (after repair value) with a six month loan at 10 or 12%, but if you do the math, look at your profit.... if it makes sense go for it. As far as getting your deposit back, what does your contract with him say about the deposit... refundable or not and under what conditions?
Mubar:
Yes he is telling you that he didn't have any credit limits for those amounts. He's asking for assistance, not ridicule.
Not all of us have deep pockets.
Voluminous
Not to be snide but now you know why you have earnest money checks held by a third party.
Have you simply nicely asked for your $5,000 back? It might work.
If you have to try to get nasty you are not in a strong position. Attempting to sue to collect $5,000 is pointless, you'll spend more than that in attny fees.
You might threaten to go to the states attny and claim fraud. Since youv'e got a title co's opinion that the investor is signing contracts to sell property he does not, in fact, own this would constitute a fraudulent practice. Unfortunately its a rather hollow threat. Even if the states attny decides its fraud they are not going to care about your 5K, they would simply prosecute for criminal charges.
Mark
Did your third and last contract has a financing contingency? If it did then you should get the funds back. If it did not have a financing contingency then you probably did not perform (hard to say not having read the contract).
Never give large earnest deposits unless there is a ton of equity and always give them to a title company. Lesson for the next deal.
Read the contract and understand it. Then ask for your deposit back. If the contract is to your advantage then use it. If not, then ask nicely and keep your fingers crossed.
Brenda
Thank you for all the advice and information.
Yes, I realize giving him the 5k was very stupid, and yes a lesson learned. Least, if I would have lost it, it would have only been 5k.
It looks like I'm going to do this deal with borrowing cash from the investor to help close with. then the difference between the purchase prices (171 and 185) minus his loan to me, with 10%, I will get in cash at closing. If I don't do this, I will loose my deposit.
Does this make sense? Is this a bad idea?
Don't get me wrong, I like the guy, and all our conversations have been very civil, our deal just wan't done right at the beginning. So we both make compromises to get it done, right?
Credit card wise, I'm 22 and I have a very short credit history. I can get a good mortgage and a good car loan, but forget getting a high limit on a credit card or loc... my highest limit is 5k, and that I have to save for a rainy day.
My mid score is 645, so that doesn't help either.
Thoughts?
-Joe