Guy Wants $5000 For Contract On Property
I called on a FSBO ad and the guy told me he was selling his house for $215k. I met him at the property and he told me that he has a contract with the seller to sell his property. Comps in the area are 245k-250k. The property needs work, about 10-15k fixup. He tells me he is an investor and when I give him 5k, he will sign over the contract to me, then I can deal with the seller through escrow with a purchase price of $210k. When I ask him about the seller, he says that he wants to just get rid on the property.
My questions are:
1.) I'm hesitant to just fork over 5k for a property that might not even be his. What paperwork should I ask for?
2.) Why can't I speak to the seller? He says that seller will only deal with him.
3.) I really want this property. Can anyone give me advise on how to handle this situation?
4.) Should I fix and flip this property or rent it out first??
Thank You for your input
This kind of thing happens all the time, if you want the property have him assign his contract over to you with an addendum that he will be paid his fee at settlement, take the contracts to a settlement company and they can handle the rest, whatever you do, do not just give him 5k upfront, if for some reason you can't close or the seller can't close then you would be out 5k. Basically all you need is the original contract and a assignment with the statement that he is to be paid by the settlement company his fee at closing. Hope this helps.
Thats a normal situation. He is just assigning you his contract. You can consider him a wholesaler. I'd keep his number if I were you, see if you can't pick up any more properties from him
[addsig]
Why in the world would you get involved in a 245k property that's going to cost you 240k to get there? You can find better deals out there than that!
Run the other direction on this property.
Jeff
Yea Im with Jeff, not enough meat on that deal.
i'm the slow and careful type, wait for the right deal, they will come along. i just about have one completed for about 100,000 under value.
to make a long story short patience is the best pollicy
TO: ALVINPAPA
1. You might check with the title company to obtain the owner's name and address.
2. Contact the owner directly by phone. Sounds like that "guy" is not an agent so by going around that guy you have nothing to loose. You will get first hand info directly from the owner not the "contract" guy.
3. Maybe the guy has not put any money on this deal himself or actually in contract with the owner ... so you could get this property even less.
4. With a little checking at the title company and a phone call to the owner may turn this property into a favorable deal for you.
I have a property that I would like to assign to a friend before closing. I asked my realtor today what the proceedure was to assign a contract, and she said that because the contract I have with the seller is between ME and the seller, the only way she knows to "assign" the contract is to draw up a new purchase agreement between the seller and new buyer. That doesn't sound like what everyone else here is doing, so what's the deal??? Zach
I don't know. If you can get a good interest rate why couldn't you just L/O it? Take a nice down, good monthly cash flow and a grand back end? I've got a house like that right now. I payed 10K too much for it but when I sell it on my L/O I will walk away with 10K after closing cost, 200 per month cash flow, and a 10K down. I'll hold it for about 3 years. Basically I've made $17,200 off of it.
Peace,
Mitchell
Do not go around the wholesaler you might lose in the long run, and it is not morally right.
No no. I mean pay the wholesaler, do the rehab and l/o it. At least that way you can make your money back. Think of it as a long term investment. No, it's not instant money but it's better than nothing. Besides...you can get most of it back with the option deposit.
Peace,
Mitchell
Ok, my first deal... I gave 5k to the wholesaler and getting the seller to sign a new purchase & sale with my name on it... I guess its easier for my 80/20 loan. Got an appraisal for 250k!! Seller willing to credit back 15k for repairs!! I'm thinking of renting this out, any suggestions??
Do Not buy - I don't know the prices in your area - I am in Atlanta, Georgia - How much rent can you get ? Minimum should be 1 % of price or approx. $2300 per month - still you are not getting any discount -
Normally - for sale by owner - you should get 15 to 20 % discount - minus fix up costs- that house should be approx. $180K to 190 K -
plus $5000 for contract and $15 K for repairs -
It is Okay to pay $5000 - it is too much - normally - you pay 10 % of net equity - as a Finder Fee- this is called
Bird Dogging - but - yes , do not pay upfront - have your attorney hold in an escrow - still have standard Inspection and Subject to Appraisal ( minimum $245000 ) clause - other wise it may appraise only $230,000 - then what ?
There are lot more deals out there -
Join a local Real Estate Investment group - if you don't have - go to nearby large city and join there - itis once a month meeting - it is worth it -
Do not get Emotionally involved - unless you liked the House to move in for your self - for investment - strictly
a Business deal - to make a Profit -
Good Luck - :-? :-? :-(
Sorry that sounds like a HORRIBLE deal...
Worth 250k
Buy for 215k
Fix for 15k
Closing costs 3%*ARV=7.5k
You are up to 240k already without holding costs and tax.
Run from this...why do you really want this house? The numbers will tell you if the deal is good, don't go by emotions.
You gotta have more than one on the burner...LeGrand says one out of 15 offers should be accepted. If you get all your offers accepted you arent doing a good job, the oppsite you are offering too much!
edit: a fool-proof way to figure how much you would pay:
70% * ARV (After Retail Value) - Repair costs= MAO (max allowable offer)
Offer under this and don't go past your MAO[ Edited by riot8ap on Date 04/01/2004 ]
Zach,
Draw up a new contract between you and the seller with one VERY small but, Very HUGE change in the conditions:
This contract is assignable. Also under the signature line for buyer add " or assigns." Then draw up an assignment doc between you and your friend for whatever amount he is giving you to be payed at the closing (run it be your title company first to make sure they will pay.)
This should solve your problem as long as the seller isn't a bank with a non-assignability policy..
[ Edited by jfmlv1950 on Date 04/01/2004 ]
Are ytou investing or looking for a place to live. This is basically a retail deal.
A lot of great responses. I wish you luck with this deal; however, below is a quote from sheryllopez. If you follow her advice you won't be too successful. She is about as knowledgable as President Bush on a good day.
Good luck
TO: ALVINPAPA
1. You might check with the title company to obtain the owner's name and address.
2. Contact the owner directly by phone. Sounds like that "guy" is not an agent so by going around that guy you have nothing to loose. You will get first hand info directly from the owner not the "contract" guy.
3. Maybe the guy has not put any money on this deal himself or actually in contract with the owner ... so you could get this property even less.
4. With a little checking at the title company and a phone call to the owner may turn this property into a favorable deal for you.
Ok...Here's the final numbers. Got a purchase and sale contract from the original seller for 235k. Got a side contract addendum for 25k credit back from seller for repairs. Appraisal = 250k. Gave 5k to assignment guy. Opened escrow today!!! Hope everything works out! Also asked the assignment guy for more properties....will keep you posted...Finally got the ball rolling on this. Thanks everyone for all your help!!
Congrats, Alvin!
How much did you net on this deal? (if you don't mind me asking)