Possible 1st Deal, Please Evaluate
This property belongs to a friend of a friend. The seller just found out he is to be transferred and needs to be out within 30 days.
FMV: 275,000
Owes: 215,000
I would take possesion sub2 and and split the equity with him when the property sells within "X" time frame.
edit: This has not been offered yet, I am just seeing if everyone thinks it is feasible and fair
.
Thoughts please.
Thanks,
Matthew Marks[ Edited by mmarks on Date 02/18/2004 ]
I'm not sure what the sellers motivation would be to enter into that deal.
He's obviously not in a great position and faces carrying the house until it sells or taking a hit on the sales price to move it quickly. If you were looking to buy the house under market I'd say you had a really good shot at it, especially if you could keep realators from getting a piece.
How would the seller benifit from your proposal? Are there other circumstances that would propel them to take your deal over just pricing it for a quick sale?
Mykle
He is motivated b/c has has less then 30 days to sell his house before he moves. Thus carring 2 payments.
That makes him a motivated seller. What motivates him to give you equity in his home?
I'm not trying to be disagreeable, and it usually doesn't hurt to make an offer, generally the worst that can happen is they say no. So it's probably worth talking to the guy, but if you can't sell it to disinterested people on the net you won't be able to sell it to the guy who's money is on the line. Throw in the fact that here you have all the time in the world to think of answers and the real presentation won't give you that leeway. The answers need to be ready ahead of time, and even then you will likely stumble over the words when you give them.
I obviously don't know alot about the situation, but I am going to make some educated guesses. The guy lives in a 275k house, he's doing pretty well. He has 60K equity in it, so he didn't over extend himself by living there, reaffirms that he is doing ok. They pay him a pretty fair chunk of change and want him somewhere else in a hurry. The guy is important to them. Pretty good chance they aren't going to let him get hurt by the move, are they covering the transition expenses?. Pure speculation of course, but don't assume he's in trouble over this deal, find out.
Maybe he has the means to support the payment until it sells. You likely have payments on your own residence and are willing to make payments on this in addition to your own until it sells, don't assume he can't do the same, find out, and gently. This guy isn't in forclosure you don't know that he is in trouble. (of course maybe you do, but from your post I don't)
Maybe time isn't a burden to him, I have transfered several times, generally in March, and my family stays in the current location until the kids finished the school year, plenty of time to make housing arrangements. Of course my employer isn't typical in that temporary housing was available to me until I made other arrangements.
Ok, assuming he is in a hurry, his employer did hang him out to dry and he isn't able to carry the payment for long... how do you sell your plan? You go to him and he says he is going to advertise it for sale by owner at 25k under FMV, he's saving the realtor costs of 16,500, so really only loosing 8,500. Of course I don't know what the market is like there, but that sounds like a plan with a fair chance to be successful. Adjust the numbers to fit your market, maybe he needs to discount it 30k, maybe it's a strong market where people bid over the asking price to ensure they get the house and 10K would be gobbled up quick, whatever fits. How do you respond to the sell it myself plan? How is your plan going to benefit him more? Keep in mind that the numbers need to be substancially better than what he could do on his own, you're asking him to wait X amount of time, that time carries a pricetag. He isn't likely to bite if he only stands to possibly gain a couple k at some point in the future.
You are also asking him add a layer to the transaction, instead of a straight forward sale he gets you in the middle and what ever kind of contract would be necessary to ensure he is protected in the transaction and receives his equity share in a timely manner. That will carry a price tag, again he isn't likely to bite for an extra couple K.
You manage to sell him on the idea, are you prepared to sell him on you? Your telling the guy he can count on you to make his payments and sell his house and get him more money than he could get without you. How will he know you're the guy who can do it? I'm not saying that you aren't, I'm just saying you will have to sell him.
If he can't sell it himself, you may be his savior. He'll want his equity and splitting $60 grand is better than getting rid of it at a steal for the buyer or even taking a loss. Action is better than inaction!
I would not present this kind of an offer to a seller that is not motivated. If I had to move and pay two mortgages/rents and be liable for two places. I think I would be a motivated seller. I don't mind being a last resort after he tries to FSBO. Getting 50% of the existing equity (equity from prices going higher not cash down) at final sale is better then possible credit/foreclosure eventually.
Thanks for everyones input so far...
Cmyke, how is splitting the equity with a third party better than selling it at a steal? If the bottom line cash in my pocket works out equally selling it at a steal now is vastly supior to adding some guy in the middle who wants a cut and I get my money at some yet to be determined point in the future. Action that isn't well thought out is just a waste of effort at best and at worst can destroy your reputation before you even have one.
mmarks, you have to be prepared man, you aren't saying anything but that you want half this guys equity.
What are you going to do for him? How long is X? How will you sell it? What makes you the one I should trust to get this done? What are the deductions from the equity before it is split? If it takes X months to sell do the payments you make get subtracted from the equity before there is a split? Will there be realtor fees involved? If yes, are they deducted before the equity is split? Is this a guarenteed deal or are you going to put some kind of out clause in the contract? What is the bottom line cash in this guys pocket that you are offering to him? What if you can't get the job done after X time has passed, then what? Will there be a set sales price that is acceptable, what is his protection from you selling it to your brother for payoff?
I agree he is a motivated seller, and should he at some point get to the edge of forclosure maybe he will be a cantidate for sub to, but from what you have described I don't see him that way now. Maybe I am totally off base and the guy is running the bath water and getting out the straight razor, I don't know.
This coming from a guy who has been where your seller is a few times. Don't come trying to sell me more BS when my life is already a sh*t storm. I want closure not more red tape. Sell the guy what he wants, closure. Buy the house yourself (take it sub to and give him whatever extra it takes to make the deal up front) or pitch it to people in your club who are buyers and take a finders fee. An old stock market saying applies here too...bears make money, bulls make money, pigs get slaughtered.
Mykle
Please Hijack another thread.
Thanks.
Matt