Can Someone Asnwer This?
This is a made up example, I'm just trying to make this clear to myself.
House is worth $175,000
Has a mortgage on the property for $150,000 that requires qualifying.
The seller accepts an offer for
$160,000 Purchase Price
$10,000 Down
Take over loan of $150,000 subject to
You sell the home for $185,000
$20,000 Down
$165,000 wraparound mortgage or land contract...however you'd like to do this.
My question is this:
I have agreed to give the seller $10,000 down, I know I can get $20,000 down from a buyer.
I do not have the $10,000,
Would I do a simultaneous close here, and use the buyers money to cover my down payment?
Or would I have to find a way to bring the $10,000 to closing?
How would some of you sub-to gurus handle this one?
The last time I asked this, maybe I was too vague, hopefully someone can answer this one for me.
I'm thinking I could do a simultaneous close and not have to come up with the $10k.
JB
[addsig]
You can do this, esp. if you're the kind of person who likes drawing to inside straights. If you KNOW your buyer will pay $20k, then nothing can go wrong, right? Not. A million things can go wrong. Then you're left scrambling for another buyer, or financing, or scouring the contract for a weasel clause to get out of it. But if you're confident it can work, you certainly wouldn't be the first one do make it happen.
If you know your buyer will pay you $20k, it would be safer to simply get it under contract with some exit contingencies (financing, inspection, partner approval, etc) and then assign the contract for the $10k profit. You won't get the spread from payments on a wraparound, but you wouldn't have the addiional hassle either. You'll be done and on to the next deal.
First thing I would do is NOT pay $10K down.
Your "seller" thinks they have about $25K of equity in your fictional "house". Your job is to show him how he really doesn't have that--if he tries to sell it conventionally. He's going to have to shell out for RE commissions, closing costs, clean-up/repairs, holding costs while he's waiting for the house to sell. In the end, that $25K is looking more like $3K, if he's lucky.
Good thing you came along. You can give him $1,000 cash to help move, maybe you can purchase his washer/dryer, etc. to give some extra cash, plus you'll take over his payments, saving his credit, preventing foreclosure, etc. He can move when he wants (provided he keeps paying the mortgage during his stay), plus he can just move--you'll take care of the rest.
You sell it as you suggested, only this time, out of the $20K down, you're only out: $1K to seller, clean-up and marketing costs (plus any holding costs you incurred while trying to sell it). You get to keep a lot more, plus the extra monthly, plus any appreciated value you built into your price that you get when your buyer closes with you (after a couple of years....).
My .02, and I'm definitely no guru...
Andy