Holding A Note
I sold a house in November 2004; the buyer wanted to close on December 20, but he could not, wanted an extension. He cannot get an appraiser, he cannot get a mortgage, etc. I gave him an ultimatum; close by February or the deal is off. He agreed, said he would get a hard money lender and close on February 28. Now he says the lender backed off. He is asking me to hold a note for $140k, he will pay me $35k. He will pay me interest. He wants to take possession, rehab the house (there are works to be done) put tenants in (it is a 7unit but I have only 2 tenants now; I am not a good manager of rental properties and this is waterbury, CT, a rough town, not the kind I normally deal with). He says he can rehab, put tenants in, then refinance and pay me off in about 6 months. I know the market has appreciated from November, the realtor has put it back in the market for $200k. But who knows how much I will get; it will take a while to close if I get another buyer. What should I do? Do I ask for more money from him? How much downpayment should I ask for?What kind of interest rate? I never did this before; what things should I be careful of?
I would appreciate any help.
I have another buyer who wants to buy at $175k without me holding a note. This person has bought 4 properties from my realtor and closed within 9 weeks. Now I am not sure what I do.
What we have done in the past is a simultaneous closing where the seller carries the note and the buyer is prequalifed through the note buyer so the seller gets their cash at closing. However, if you have another buyer that route may be easier. Let me know if you need any more details.
Of course, I would rather listen to my investor friends on TCI than an attorney.
ahmedmu,
Sorry I am late getting back to you. What I meant was that you indicated he could not get a loan now, but he was asking you to carry back a note for $140K. If your note is short term, (i.e. 6 months, 2-3 years) it is not likely that his financial condition will change within this time frame. In other words, you may get the property back.