Short Sale
i have a home with a property line that goes through the middle of my house...the other half is owned by a good friend...i want to short sale the home to save my credit from forclosure , can the house still be marketed with such a grievous error?
Buyer 1 has no responsibility and never takes posession of the home and is only on contract for up to a month. Buyer 2 purchases the home at market value and keeps posession to sell or rent therefore taking the risk of ownership. The weird twist is that the birddog pays all closing costs and holding costs for a full year. He and buyer 2 split the rest of the equity.
I am confused as to how many people are in this deal
seller
buyer 1
buyer 2
investor/birddog
1) which one of these people are you.
2) does buyer1 buy the property or just assign it. if it is just an assignment, why does the investor/bulldog need you?
3) how does buyer 2 make money? he is buying a 100k property for 100k. he has to sell it to make money.
I assume that you are buyer2. that you will buy a property for 100k, split the 67k with the investor/birddog. both of you get 33.5k each. and later you find out that the property was really only worth 50k.
Or if you are buyer1. The you will find another sucker to be buyer2 and and stick them with paying 100k for a 50k house. the investor/birddog just needs your credit to buy the house.
all of this is way too complicated if you could really get a 100k house under contract for 30k. real estate is not that difficult.
Just my suspicious nature.
Brenda
Yes. You have all of the players correct.
I am a bit confused on the buyer 2 portion of this as well. I concentrated on the buyer 1 position since that was where I would have felt most comfortable starting off.
The birddog already has buyer 2 lined up. The reason for buyer 1 (in his words) is so the original home owner does not run off with the extra equity. That is a little confusing too because I know that you can run through a process prior to close and get money back at closing for the extra equity in the home.
All of these questions that you raise is what makes this sound very suspect to me as well.
Sounds like a shell game to me.
ya got me confused.
I agree. Sounds "funny"! I would stay as far away from this "scheme" as possible. You want to keep your reputation honest & spotless. It is the only way to stay successful & believable in this business!
There is always another deal waiting, & if you are always honest in them, there will always be MORE DEALS!!
[addsig]
NewKid,
Quote:
>>It would appear that a $400 investment to discount the interest rate saves $382 in total financing costs when the loan is paid off after 48 months.<<
This is correct $9906 interest at 6.75% less $9524 interest at 6.5% = $382 interest savings.
This part is incorrect:
Quote:
>>the borrower seems to come out $647 ahead overall by paying one discount point when the loan is paid off after 48 months ($265 in monthly cash flow, and $382 lower cumulative interest paid).<<
Here is where you are going wrong. The $382 interest savings comes in two parts, the $265 in cash flow savings and the $116 additional principal paid. Note this totals essentially $382. The same as the cumulative interest (the $1 difference is due to rounding).
If you add the cash flow savings to the cumulative interest, as in your example above, you have counted the cash flow twice.
You do have a point about reinvesting the additional cash flow if you pay a point. But you also have to take into acount the lost income on the point paid.
For example, say you take the $400 out of an interest bearing savings account paying 2% to buydown the rate, and you put the $5.52/mo back into an account with the same 2% return.
If you invest the $400 in a lower rate of 6.5% the $400 is GONE, what you have for your money is $5.52/month going into an account that at the end of four years will have a balance of $275.61 if invested at the same 2% rate. Since in this example it takes $116 less to pay off the 6.5% loan than the 6.75% loan at the end of four years, that savings can be added to the $275.61 in the bank that resulted from the cash flow savings plus interest for a total savings of $391.61.
Had you left the $400 in the bank and taken the higher rate at the end of four years you would have had $433.29 in the savings account.
As you can see there is a loss of $41.68 in this analysis by investing a point to lower the rate for four years. If the rate paid is higher you still end up losing more by taking the $400 out and replacing it with the cashflow earning the same rate. Now over a longer period the invested cash flow plus earnings will be more than the $400 plus earnings, but it takes a while.
Thanks for taking the time to discuss.
[ Edited by Money4RE on Date 06/18/2005 ][ Edited by Money4RE on Date 06/18/2005 ]
there are calculators online that will do this work for you.
In other words, there is no significant difference.
Does not appear to be a significant difference when the amortization period is only 15 years.
If the loan term is 30 years, then $401 in cumulative interest is saved with the lower rate loan.
If the point paid will discount the rate by 0.5%, then the cumulative interest saving is twice the amount paid for the point.