Subject-To Possible Deal
Okies, here is my scenario and I'm hoping for lots of feedback:
Found a really nice 4bd/2bth approx 1800 sq. ft. home. List is $129,900. From my research, looks like it was purchased for $114,500 in 2000 - 100% VA financing. Owners are in the military and will move to CA. They are open to leasing the house back till June.
Obstacles:
1. Owner listed the house with an agent, and a buyers agent lead me to the house. (I'm willing to pay her 3% if the rest of deal will work).
2. VA Loan.
What do you all think?
Ho...
Hey if it makes sense for you to do the deal then do it. Just make sure that the property will cashflow. I am sure that it would if its a nice rate. Can you handle the payments if you can fill it? Also can you get the seller to cover some of the cabbage for a month or two? Just a thought
JR - thanks for the input.
I can handle the payments for a couple of months if needed. Using conventional buying, this is just about a no brainer.
But my thought was how can this be done Subject-To with the given obstacles.
Ho...
HoGiHung,
I guess I'm just missing some of the pieces here.
1. What's the property worth now?
2. Why would you want to pay 3% or 6% to take on someone else's problem?
3. What will it rent for?
4. What do they owe?
5. Why is this a deal?
6. What happens if your market drops 10% in prices and rents over the next 12 months?
7. What does Section 8 pay for rent for this type property?
8. Does it need repairs?
9. Is it a desirable property in a desirable location?
9. Etc., etc.
I'm not attempting to be a naysayer here, but most of the answers to the above questions are important. If your area is anything like mine, it's definitely softened over the last 12 months and buying at 95% to 100% of the value is completely unnecessary.
In my opinion quality is much more important than quantity. I didn't have that perspective when I first started, but I wish I had.
Anyway, I just wanted to give you another view to consider...
I forgot to mention that if it's a VA loan and you do think it's a deal, there's a provision in the VA guidelines that specifically mentions selling on a land contract. In other words, depending on other considerations in your state regarding this technique, the VA permits this type of purchase and it might be a viable acquisitiion method.
[addsig]
Thanks for the input so far. To answer some of your questions:
1. The place will rent for 1200+
2. I would pay 3% to my buyers agent since she found the property. (that 3% would be deducted from what I would give the seller)
3. When I am working with people, I maintain a high level of honesty and truthfulness. If my Buyers Agent found the property for me, he/she should be compensated.
4. I've done my analysis and show a +16.07% return.
Back to the obstacles:
1. I need to see if the owner will dump their realtor and convince them how beneficial a Subject-To deal is to them.
2. Figure out what I can do about the VA loan, if anything. If the sellers won't require a new VA loan for a bit, I should be ok. But if they require a VA loan, is there anything that can be done?
Ho...
$$$$$$$$$$$$$$$$$$$$$$$$$
3. When I am working with people, I maintain a high level of honesty and truthfulness.
Back to the obstacles:
1. I need to see if the owner will dump their realtor and convince them how beneficial a Subject-To deal is to them.
$$$$$$$$$$$$$$$$$$$$$$$$$$
Ho,
Just a question.
Why would you ask the seller to dump their realtor?
Jom[ Edited by Jom on Date 02/12/2003 ]
Perhaps the point was missed. My buyers agent found the property for me. I would compensate her.
If the seller wants to keep their realtor, that is their business but it will mean they get less. That is up to them.
This house has been on the market for 4 months. Their agent didn't bother to come to the house when we visited. Their agent didn't follow up. MY agent had done a lot of leg work. Get the picture?
Ho....
Ho,
I don't think I missed the point.
I think if you try to convince the seller to dump their realtor when you found the property because of the seller's relationship with the realtor, (your agent wouldn't have found it if it wasn't listed) you are not dealing "with people with honesty".
I think we all have to make decisions on how we deal with people. Not only the people we personally deal with one on one, but all people involved in a deal. Just because you haven't met this person doesn't mean they don't deserve proper treatment. This is their livelyhood, and they did the work that led to you finding this property.
Jom
Well, thanks for the feedback so far. Think we got a bit off track and I was looking for Subject-TO experts to offer their advice on the original two obstacles I presented.
I'll try this one solo. Again, thanks for the feedback.
Ho....
I realize you were asking about subject to's. But your attitude about the listing agent floors me. You evidently don't know what an agent goes through to list a property. Without the listing agent, I doubt your buyer's agent would have found the property.
If anything, your buyers most probably surfed the MLS and located a property to match your criteria. I can do that in 3 minutes.
The listing agent had to market to the seller, gain trust and confidence of the seller, provide pricing and comps, present the offers, review all offers to make sure an unusual addendum was slipped in by the buyer, hold open houses and generally make sure the deal doesnt fall apart for any number of reasons.Now multiply that by 10 to 20 listings.
Next: Pay for your own gas and car maintenance, your own ads and marketing material and split your commission with your broker and the IRS.
Your attitude is unethical.
jack-fla,
Sounds to me like you are a realtor. After readind HoGiHung's post and replys to your questions and comments, I do not find anything wrong with his way of conducting business. He did say that the listing agent never showed to the sellers home, He also did say that the listing agent never even followed up. If this was my listing agent that I was paying several thousand dollars to, I would expect for him to be there or at least follow up, not to mention that he has had 4 months to sell the house... I would have fired him! I do not care for Realtors. The 2 times I did use them they listed my house for 6 months, overpriced the house to the point that no one even called and at the end I ended up selling the house myself and saving thousands of dollars. I'm not sure if you are aware but this is a CREATIVE INVESTORS site. I happen to be a business man and if our company drops the ball guess what happens? HoGiHung has done exactly what many of us would do. After all business is business. You drop the ball and someone else will pick it up and run with it.
I have nothing against Realtors but I am aware that they can cost the average homeowner more than they can afford!!
Just my opinion!!!
By the way HoGiHung, what is the app value?
Happy Hunting
Repoman [ Edited by RepoMan on Date 02/16/2003 ]
Hi,
I am not saying dump or not but the agents I have worked with---or tried to work with have been lazy and have thinly masked comtempt for investors. They don't know half of what I know and don't seem interested in learning anything. They have cost me about 60k in deals because of their laziness and/or blundering. Hmmm did I leave anything out---oh yes, I won't be working with 'em anymore unless I absolutely have to!
All the best in your deal Ho!
Mel
Repo and Mel, thanks for your replies. Maybe a mod can lock this thread 'cause it has gotten way off topic of my original post and my desire to get input on the two obstacles noted in my original post.
The FMV of the house is above the asking price. The current owners are a Navy family that financed 100% + their closing costs. They have very little equity. I could offer them more and their agent did a disservice to them.
There are more houses of the same nature in the neighborhood that are FSBO so I'll contact those sellers directly.
If those who have posted and found my tactics questionable, I ask you - Have you read the Subject-To manual by John Loche? If not, maybe you should or at least read more on the board before you attack us creative investors.
Ho...