Deal...maybe?
I have a "fairly" motivated seller here who is open to a sub-2 deal.
2br/1ba
Selling the house FSBO for $169k
Says he owes about $130k on the loan.
Is willing to accept $24k for equity in home.
It is currently listed with realtor but he doesn't think there will be a problem getting an unconditional release on the contract..
I am not sure what I should do here. What kind of down payment would I have to ask for to make the deal worth it.
Any advice from the experts would be appreciated.
IF he's truly motivated, try to get him to accept nothing.
If he needs to move somewhere else maybe you can give him that money, or even put it on a credit card.
Whatever payment you decide upon, try to get him to take it as installments.
There is a limit to the motivation of the seller. It all comes down to dollars. There is a number where the deal doens't make sense.
You just have to find out what that number is.
Good luck.
The first thing I ask with a FSBO, is "why are you selling?" If they are selling just to move into another house, don't waste your time. If they are moving away, getting divorced, there was a death, or a foreclosure, now you have a motivated seller.
A second thing to ask, is what is the house worth? How much are you going to be making on this one?
[addsig]
I am pretty certain he wants to get about $20,000 out of this. If there is a way to get him to accept less I am all ears! As to his motivation, he did buy another house. It was really just an upgrade but it has been sitting on the market and having to make the monthly payments is increasing his motivation.
Here is one option: You could take title to the property subject to, and give the seller 20K for his equity when you sell the home or refinance. You definitely need to know what the house is worth, so you know if the numbers will work. Say the house is worth 170K. If you can take title subject to, and agree to pay 20K for his equity when you sell the property, you have a potenital of almost 20K profit in the short term (170K-130K-20K). Minus closing costs, attorney's fees, holding costs, sales costs. If you can get the seller to wait for his money, say 2 years, you could sell the property on a contract for deed, and make even more by allowing the property to appreciate a couple of years. Do you know what the seller's mortgage payment is and what their interest rate is? You need to consider that as well. You have a lot of options with this deal, but first things first, have a realtor get you some comps on the property to establish its value, and go from there.
Pretty skinny deal...either give the seller a 2nd or moving money...or go to the next deal...saving your time, resources for right opps.
I do know that the mortgage payment is around $1,000 a month. I can get more information tomorrow to find out exactly what the numbers are.
For those saying its not a good deal, could you elaborate more on why this wouldn't work?
If you have to pay the seller 20K for his equity UP FRONT and take title to the property subject to, then this is probably a deal you should reconsider. However, if the seller is motivated and willing to wait for his money, then you have possibilites. I think the others are just trying to say that you would have to invest a lot of your own money to make this deal work, with a somewhat skinny profit for as a reward for your risk.
Alrighttt... my $0.02 worth now!
The way I would approach this deal:
1) Agree upon a purchase price first.
2) I'll try to take this property S2 with as little cash out of my pocket as possible (like $10!).
3) I will be willing to give a max of $2-5K to this seller, AFTER buyer enters the picture (ie. after I get my down payment).
The rest of the equity to be given when buyer gets a new loan on property.
4) If seller really, REALLY wants more of his equity NOW, I'm okay with him doing a cash out refi and getting some of that equity out and then giving me property subject to loan(s). But DEFINITELY no more money from me!
5) If none of this flies with the seller, I'd say NEXT and walk - doesn't seem motivated enough for me.
Well, folks? Do you see any problems here? I sure don't!
Thanks.
I'd offer to take property s2k the seller to refi and pull out his equity (selling price - current loan balance) and give me the house subject to both loans. My down $10 or as close to it as possible!
OOPS! Ignore everything after 'Thanks.' in my post above - JUNK I should have caught and erased before posting!
Ok, i see what you're saying. Could you just explain the refi process? How does the seller get his equity out without me paying him?
by doing a re-fi on the house or a HELOC for a set amount. Say 20K then you take the property SUB-TO the 150K in loans on the property.
The seller gets his $$ and you get the property for $10
That sounds like a win-win situation. There aren't any additional concerns taking over a HELOC is there?
Also, I have a lead to a buyer who may want to get in on this property and wants to put a pretty hefty deposit down.
Thank you to all who have responded to my post. Your advice is invaluable!