Will This Work?
Can anybody offer some advice as to how to structure this deal to make it work. 2nd REI and i want to make sure i do it right and run it by the pro's. A client is 2 months behind on payments the FMV of the home is 180k. and the balance on the first is 85k. No other loans on the home but the do owe about 24k in credit card debt and they can't refi or do a 2nd due to low fico scores. Any suggestions as to how i could make this work? I've seen the house and it would need minimal repairs, they've maintained the property pretty well, 5k at most. They're about 2k behind in payments.
Here's what i was thinking
180k FMV
- 85k Balance
- 2k default amount
- 5k repairs
- 2k holding costs (approx 3 mo. of paymts.
- 14k commissions and closing costs
= 74k
if i offer to split the equity with them, and have them quit claim the deed could this work? Or is this approach all wrong? If it's good to go then what kind of documents would i need? Im planning to meet with an attorney early next week specializing in real estate law and contracts here in california and i would like to know ahead of time if there is anything specific i should ask him about
Any suggestions would be greatly appreaciated. thanks ahead of time, and this forum has been an awesome source of info kudos to all of you who contribute your time and helpfull suggestions. :-D
First, I'd never ever get a quit claim deed. IF you want the property deeded to you, then go full boat and get a good and proper warranty deed (or CA version).
Second, I don't ever mention whether or not these people even want to sell, so do they? If so, what are they looking to get out of the property? If they are not really motivated to sell yet, then there is no deal here regardless of how good it looks to you.
If they do want to sell, they may take an equity split offer, but that still leaves them with $25K in credit card debt until you sell. And if you get the deal like this, what will make you able to sell the property better, or faster than they can themselves?
Let's word it another way. With your equity split deal, you're basically offering them about $35K over their balance (or about $120K), BUT they have to wait for it for at least 3 months. Any longer than that and their profit starts dropping. How long do you think the property would sit if THEY listed it for, say $135K? That's 75% of FMV by your figures, and that still gives them $15K to pay agent fees and/or price reduce BEFORE they get to what you offered.
Now, I don't know your market, but a property listed at 75% of FMV with no real repairs needed would not be there very long at all here.
Roger
thanks for the reply raj.
Ok, i've realized i have to find out what they want to get out of the property, so i set up an appointment to meet with them this sunday. I might have jumped the gun, thanks for pointing that out. But allow me to clarify on some of the other points
they may take an equity split offer, but that still leaves them with $25K in credit card debt until you sell. And if you get the deal like this, what will make you able to sell the property better, or faster than they can themselves?
i don't think i was too clear on this, my appologies. I have the money to buy them out and what i was thinking is that i would offer them the 35k up front in exchange for the grant deed. This would eliminate them having to wait 3 months. Also my brother (realtor) is willing to list the property. im sure i can get 180 for the deal because i've found 2 comps, (two houses down) with less sq ft. and smaller lots selling for 180k, and weren't listed on mls for longer than one day before they had offers. I hope i did a better job of painting the picture. My appologies for being so unclear the first time. Still kinda new to this.
Now i would be using their existing financing for about 2 month before we had all the repairs done (1 month) and sold the house (1 month). Any suggestions on what i should do here to make sure im not breaking any rules. I do realize that im getting ahead of myself (rookie mistake im sure) in assuming that they'll want to sell, but i'd approach the deal overpreparred than under. thanks again
In CA there is a specific form you have to use, It provides for a 5 day wait whereas you and the seller can not make a deal if a NOD has been filed. Sorry I do not have a copy handy presently, and do not recall the title of it. I think I recall your having said you have an agent brother/brother-in-law, he ought to be aware of it.
Good luck!