Going From A Land Contract To A Mortgage?
Hello fellow investors,
I am in the process of turning a cfd into a first mortgage and we have been in the house for 7 years now we were turning into a 1st about 2 years ago BUT! then there was a storm and we lost a good portion of the roof we used our ins. co. to pay for it but then found a whole house full of undisclosed damages. We decided to stay in the property and fix it instead of loosing all our equity from the past 5 years. The owner and I agreed that I would pay for the rest of the fix-up in lieu of house payments, we went over on the $ spent but it didn't seem to bother the holder of the deed he was basically out of the loop. He did however get a lawyer and sued the previous seller and it took 2 years to get to court and when we got there the judge threw it out because nobody had done a professional inspection, blady blah! Now, we bought the house for $53,500 on a contract back in 97 with 3500.00 down, and since have rebuilt the house from the foundation on up with new everything: wiring/electrical, plumbing, walls, cabinets, windows, etc... We are ready to buy it now and want toknow if there is a way to get the seller to come down on the price without taking him to court and going through the whole process again. He has even sent me phone calls stating that he wants us to pay the attorney fees he has incurred The house is worth about $120,000.00 now and he says that all the equity in the house should be sufficient for us but we will be borrowing 70% to pay the remodel cost and for the $49,000 we still owe him, we never got acknowledgement of the labor incurred from this just the materials towards the mortgage payment for the last 2 years we feel we should get some off the final cost for the labor involved since we had to live here and indure all the nightmare. Anybody wishiong to work on this with me for a bit (just shake it up a little) let me know. There is gonna be about $40,000.00 left in equity when we refinance this place and want to do some real estate investing with it . Since my family is really good at putting houses back together now we think that real estate is where we want to spend our time and effort. Oh by the way, I make my living pumping holding tanks/and septic systems.... Thanks for everything.... bigging
Well, I feel for ya! I have had 3 land contracts and on everyone of them there have been significant undisclosed damages. I believe at this point is WHY they sell on land contract. Couldn't get a conventional mortgage. Ok, anyway to answer your question. You are lucky that he conceeded the cost of materials and you probably should have gotten everything in writing. I don't think you have much recourse in this matter. I wouldn't think of paying for his attorney fees. You might consider contacting some of these guys on the board and seeing if they would anonousmously contact him to "buy out the note". You would have to pay them for their services but they might could save you thousands in the long run. Since the whole thing has been such a headache, he might just bite onthe idea. Basically, you are supplying the funding and they are making the deal and get paid by you.
I have seen this done very successfully.
Just an idea, don't know if it helps any. By the way, don't try and do it yourself if you are not on super great terms with him. You will need someone who really knows how to do this and has a lot of experience at it. Again there are guys on this board who will talk to you about it.
Barbann
Two views...
You can try to press him or cut a deal. If there is a deadline coming up I am not sure if you have the time to wait him out.
Alternatively you recognize that you had an expensive education and you move forward. You are at least coming out right side up. Make sure if you do more deals you get an inspection or something similar to make sure you are buying what you expect.
John
PS. I am a note buyer and could approach him to see if he wants to sell at a discount. This might not be worth it depending on your views.
Why would the seller take less than face value guys? Unfortunately, he is holding 4 Aces. If you don't pay what you contracted for, he'll eventually own a $120,000.00 house, thanks largely to your effort. If it were me, and someone tried to buy my note... and yes I get approx 3 emails per day to buy one that I have, I would just chuckle and say, naw.... but thanks for the offer. The good news is, you will have equity now to take what you've learned and apply it. Now, maybe it's your turn to make real money.
Good Luck,
Shawn(OH)
Update! to those that replied to my post, Thank You. Now this guy wants to possibly settle for 53,000 which is 3,000 more than we originally agreed on in the beginning. He feels that he should not have to give us any credit for the renovation time (labor) because we will realize that in the equity and that we owe him for the mortgages that were not paid during the rebuild time. When we agreed to do this rebuild with him it was agreed that we would pay for it in leiu of mortgage payments for the time it took to get to court. and it just happen to fall on the same time frame, (finished the major renovation/and went to court about the same time) so now when he needed to fill out the verification forms for my broker he stated that we had not made any payments on the house for over 2 years. <IMG SRC="images/forum/smilies/icon_mad.gif"> I called him the other night and he stated that he was loosing the positive cash flow he was getting during the rebuild, over the last two years. That by the way was about $120.00 a month. We would pay him 456.00 and his payment was 336.00 or in that close ballpark. So right now after all is said he tells me that his payoff is $26000.00 and he payed $5400.00 for the attorney. when the original deal started he put down $10000.00 and took a mortgage with the bank . Now he wants us to pay him for the last two years in full and pay half the attorney fees or more ( not sure yet) plus I think that there is gonna be some interest added in there somewhere also, (10%) for every month of unpaid mortgage. <IMG SRC="images/forum/smilies/icon_evil.gif"> So I asked him if he was trying to NOT sell us the house or bilk us out of the small amount of equity that was left in the house when he gets finished with us. His comment was that he wanted to sell us the house but wasn't gonna loose another dime on this deal. he was finished being nice guy!
So as of right now we are waiting to see what he puts down as a payoff on the new sheet he went and got from the broker yesterday, no contact last night I was to furious and had a major headache all day from the major stupidity on my part thinking that this was going to go so easy. <IMG SRC="images/forum/smilies/icon_lol.gif"> Any replies would be nice to read and will consider all options right now. time is of the essence to me and my wife since we are working on our credit report right now we are going to build it into the 7's and never go through this again.
By the way has anybody ever heard of the company called "reii" Real Estate Investing Institute.
Thanks again to everybody that has taken the time to read this post and answer with their expertise.
bigging <IMG SRC="images/forum/smilies/icon_biggrin.gif"> [ Edited by bigging on Date 03/10/2004 ]