I Think I May Have My 1st Sub-to If I Can Do This Right...(m)
A couple of weeks ago we went and looked at a HUD property. A lady came over from across the street and introduced herself as a realtor. She told us all about the HUD property and about the lady who had lived there. She was so eager to get something going with us. I told her that we were closing on a property that following week and that that property would be our first big money maker that after we sell that property we would then be looking to buy a residence for ourselves. She wants to list our property for us and she said she has something coming up we may be interested in. We've seen closed on our property and she called me last week as a follow up. I told her that we are going to try and sell it ourselves,maybe do a land contract or something to bring more buyers. At that time she became really interested. She started telling me how she made bad choices before she got into real estate and how she's looking to get out of her house. She interested in my property I just bought. She wants to know how much the down would be and was like, if you want you can come look at my house and if you would be interested you can make an offer on my house.
Her house was directly across from the HUD we looked at. It is in a great area. If I can pull this whole thing off it would be great.
How should I hadle this? I Gave her the address to my property and told her to go check it out and if she likes the neighborhood then we'd go from there.
How would you guys handle this? I want to get hers sub-to but if she's CFD my property how should I handle this whole deal?
I know this got a little long and thanks for reading, thank you more for responding
quinn
30 reads but no replies. Wow, is this situation that out of the ordinary? Well, thanks guys for at least reading, it was a really long post. I'll figure something out but would still like some opinions and ideas if anyone has any.
Thanks everyone
quinn
Hey there, nice to see you closed on your property!
As far as the situation you described the first thing that comes to my mind is why would this lady want to seller her home and then buy on contract? I would work on finding more out about her situation. Is she behind in her current mortgage? Is her house worth more than the one you are rehabbing? If not, what makes you think that she can afford the payments at your place?
In terms of the mechanics of working the deal, you can simply take the seller's property sub2 and then use a contract for deed when she buys.
Your actual question to answer isn't clear but these are my thoughts. Do you have a specific question or just looking for comments?
Thanks Frogger for the reply
I don't know her situation fully yet. I guess what I really want to know is how should I handle this type of deal if I'm taking her house sub-to, then I'm supposed to also get a down from her too for my property. I'm asking close to 20k for a down, I'm willing to accept 17k but will of course increase the purchase price. What other negotiating method should I use other than lowering the down payment?
quinn
So let me get this straight, she's a realtor that 1st approached you with info re: the HUD across the street. Then she asked for your business (list your house) and offered a lead on another prop. Then she asked you to make an offer on her house. Maybe it's the NYer in me, but I would:
Check your state's website to confirm that she is a licensed realtor (how long, what company, status)
Next, I would check the local courthouse where her house is located to do a spot check (mortgage, deed, tax dox). I have online access to these dox.
If all checks out ok, then I would have another meeting with her to determine what her needs are. What's her motivation? What about that prop she mentioned previously? Find out as much as you can to determine next steps. Keep us posted!
I would first continue to market your rehab as planned. I wouldn't involve this person into your exit strategy just quite yet. I'm not sure what type of value of house we are looking at here but I think $20k down is a little high. John Locke says he does it but my market supports about 3-4% down. What does your market support? Where is your $17-20k number coming from? Do you really need it or does it just sound like a good number?
I also would check out the house this lady is looking to sell. What is it worth? Good or bad location? (estimate days on market). Get the house stats from the county assessor. Estimate the mortgage balance and check for other liens on the property via the county recorder. You'll know enough to start thinking about exit strategies.
From here you are armed with knowlege and you can go talk to the seller. Ask them why they are selling their house and learn their modivation. Will they sell for what they owe? Are they behind in payments? What are the terms of the note/mortgage?
If you aren't able to make a decision on the spot you can tell them you'll have to run the numbers and get back to them or you have to check with a "partner".
You now have all the info and can analyse the deal. If the seller needs money, there are back payments, or house repairs, you'll have to find out how much $$ you need, how you plan to pay for it, and figure out an exit strategy.
The only way I can really see the sale and purchase of the two properties coming together is if the seller has up to $20k equity in the deal to offset some/all of the down payment. Even if the seller has the equity, you may have bills related to the rehab that must be paid off (thus why you need 17-20k).
If you must work creatively from here, you'll need to come up with your own financing or bring in a partner. Is the deal worth the work?
My guess is that you won't be able to have this lady be a seller and buyer. The only real way I can see this working is if the lady is downsizing. Maybe you can find another property that is cheaper that you can sell?
Anyway, I hope this gives you some things to think about. GOOD LUCK
Thank you so much for the reply
I'm came up with the 20k because thats almost 7.5% of the asking price. I'm not really sure what the market in that area will bear because this is my first property to sell this way. Iwas thinking of running a test ad in the Sunday paper next week to see what type of response I get. I'll run the ad and see whats the most I'll be able to get. It won't really be a test run if the results prove to be fruitful.
Yea, I think I'll have to keep the realtor and my property separate. If I buy her property, it'll have nothing to do with her buying my house. I think she told me that she's only been doing real estate for 3 years, her husband is also an agent. Her house is in a really good neighborhood, the house around the corner from hers is listed for 200k.
I'm going to let her pursue me on this one, that way I'll see how motivated she is and how likely she would be to accepting a sub-to offer.
Thanks guys
quinn