Posted by Stacy (AZ) on July 08, 1999 at 24:24:30:
…of that cartoon where the little devil is on the right shoulder and says, “Ah come on, fishin’ is better than goin’ to school!”, and the angel on the left says, “Don’t listen to him, he’s high on crack!”
Well…maybe it wasn’t exactly like that…
To each their own. Different opinions make this board so valuable.
Stacy
3rd attempt trying to do 1st deal-- quick pls help – - Posted by JCP
Posted by JCP on July 07, 1999 at 19:25:43:
Here is the situation-
5 BR, 3 Bath on 1 acre
Needs 20k approx in fixes.
Older woman owns and needs $ soon.
Comp’s in the area are 120k and up.
Woman is asking $40k, which is very low
She has had bad tenants and has the following on the home
$1500 lawyer bill from the last tenant
$750 tax lien
$1750 tax lien #2
$700 current tax bill
By putting approx $20k (I can use credit cards) into the home, it should be worth atleast 110-120k
Using Steve Cook’s #'s ---- 100k X 70% = 70k - 20k = $50k offer
Am I doing this right??
I have seen the home and am putting an offer on it Thurs pm
Next – Would hard money be the best??
I would like to live in the home
Otherwise – I could pay her bills and l/o it at 40k- bills???
Pls help – you have all been so helpful in the past, I really appreciate it.
Jason
Thank you everyone, I will keep you updated on the progress - Posted by JCP
Posted by JCP on July 08, 1999 at 22:22:04:
nc
Re: Clarification of “Fair Shake” Comment (long) - Posted by Stacy (AZ)
Posted by Stacy (AZ) on July 08, 1999 at 18:09:11:
Regarding my general comment about making sure the seller is getting a fair shake for her equity, I’d like to clarify where I was coming from. I understand the advice from the others to give the seller her 40K and leave it at that. Under most circumstances, that’s exacly what I’d do.
I think there are rare occasions when investors will run up against sellers that are, for one reason or another, not mentally competent enough to watch out for their own best interests. Maybe they’re a little mental, slightly retarded, or distraught, alcoholic, in a stage of Alzheimer’s, in a panic, or any number of other conditions.
I’m lucky, so far, that I have never had to deal with a seller I felt was not mentally competent, or borderline. But I imagine it happens every day across the country. This is where my best judgement will have to evaluate whether or not the seller is “motivated”, or has crossed the line to incompetence.
I think there are two things I’ll want to watch out for if I encounter a seller that is getting into this gray area. First, my own morals. I won’t get into that discussion. Second, the possible legal ramifications. For example, I find an elderly seller who it turns-out is experiencing some of the natural aging effects that can degrade cognitive thinking. I agree to purchase her home for a severly reduced price. Later, her son catches wind of the deal she’s completed, and sues me for taking advantage of her, as a saavy investor. Court is one of the last places I want to be.
I am not passing judgement on anyone. For this deal, the elderly lady could have a mind sharper than mine for all I know (wouldn’t be too surprising). What I was trying to convey was that this seemed like an extremely sharp discount to the woman’s equity. The as-is value of this house is about 100K, and she’s selling it for 40K, giving away what seems to be about 60K in equity, which is half the ARV. Bells and whistles start to go off in my head…proceed with caution.
BUT, if she’s obviously competent, sharp, and knows what she’s doing, I’d probably pen the contract as quickly as possible. I don’t expect anyone else to agree with my position on this, but this is where I stand.
Stacy
Re: 3rd attempt trying to do 1st deal-- quick pls help – - Posted by Redline
Posted by Redline on July 08, 1999 at 15:14:58:
JCP: Good advice below - and additionally … dont ever, ever and I mean ever offer more than the person is asking for this kind of house unless you KNOW for a fact you’ve got competition (doesn’t sound like it) and the deal will still make sense. Steve Cook’s formula is a good rule of thumb but nothing is written in stone. Look at each deal objectively and individually.
RL
Re: 3rd attempt trying to do 1st deal-- quick pls help – - Posted by Bob-Tx
Posted by Bob-Tx on July 08, 1999 at 08:59:32:
I agree with others - this is a good deal so you must act quickly to get it under contract. Also agree that you needn’t worry about her “fair” equity…asking $40k-that’s what you offer…or less.
Any chance she would take $10k cash and carry $30k on a short term note? It would sure save you some dinero over the hard money lender route. Just a thought.
Good luck and keep us posted.
Bob
Re: 3rd attempt trying to do 1st deal-- quick pls help – - Posted by Stacy (AZ)
Posted by Stacy (AZ) on July 07, 1999 at 19:59:19:
Jason, sounds good. First things first. You’ve done enough checking to get it under contract. Do it NOW, and do the rest of your analyzing later. Can’t steal in slo mo. I’ve lost deals by moving too slow, and I can still taste it! I would make sure and include a general contingency that you must inspect and formally approve the property within 15 days or the contract is void. Others don’t use contingencies, but I do.
Then check title, and make sure you know everything about this property. Inspect yourself, or get a contractor or professional inspector to check the property. $150 well spent if you have to go for the formal inspection.
Verify your numbers.
Since you are wanting to live in the place, I’d contact a mortgage broker before a hard money lender. You may be able to get a very nice loan being an owner occupant.
Also, food for thought. I don’t know much about your seller, but consider making sure she gets a fair shake for her equity. I’m not judging, enough said.
Just my quick take.
Stacy
Re: 3rd attempt trying to do 1st deal-- quick pls help – - Posted by PBoone
Posted by PBoone on July 07, 1999 at 19:52:19:
I would give her the 40K with this clause
“Closing to occur after tenants have been removed” or ask for a 5K reduction and do the movement yourself after you meet the tenants. Heck maybe you’ll like them and let them make the house payment while you use the additional Hard money for another deal.
As a landlord I have a lot of respect for tenants living conditions. There are many bad tenants but there are just as many bad landlords.
Pat
Re: Clarification of “Fair Shake” Comment (long) - Posted by Rich_PA
Posted by Rich_PA on July 11, 1999 at 24:52:13:
You’re right, it doesn’t seem that many people agreed with you.
But I do.
Its nice to know that a few people in this country still have morals (what with clinton as the “leader”, and all).
Rich_PA
Re: Clarification of “Fair Shake” Comment (long) - Posted by Drew-TX
Posted by Drew-TX on July 09, 1999 at 10:53:18:
Stacy, of course anyone with $150 can sue anyone they want. But if you’re talking about someone successfully suing you for doing this deal, no way.
If the person has been adjudged “incapacitated” or “incompetent” by a court in that jurisdiction, then, and only then, might the legal guardian (the son in your case) be able to “unwind” the sale–because incapacitated persons cannot legally enter into any agreement. If the lady wants to give away a bunch of equity, that’s her business, and the courts will not get involved.
A friend of mine recently bought a house for $120K from an elderly lady. The house appraised for $165K, and my friend even told her that she was giving away serious equity. But she was happy to sell it to him at the sharp discount–because he had lived in the house as a tenant for 3 years, and she liked him. Some people may think that’s crazy, but the courts would never touch it.
Plus, if someone WERE legally incapacitated, you’d figure that the guardian would show up before closing to protest the sale.
Just my $0.02.
Re: 3rd attempt trying to do 1st deal-- quick pls help – - Posted by rich
Posted by rich on July 07, 1999 at 22:41:10:
Forget about the fair shake for the seller. If she wants 40 and she gets 40, she will be happier than you know. You can’t judge others by your standards.
Take the plunge. Make the offer. You are in a no lose position if you are willing to live in the property.
Just my opinion.
Rich
Re: Clarification of “Fair Shake” Comment (long) - Posted by Stacy (AZ)
Posted by Stacy (AZ) on July 09, 1999 at 13:05:49:
Good comments, Drew.
Although I agree that it’s logical to think a sale couldn’t be unwound in court unless the seller was classified as incapacitated PRIOR to the sale, I have no doubt a judge could rule against an investor in cases such as this. Going to court is an expensive crap-shoot. Whether you think you have the law on your side or not, just the expense of defense is enough to ruin your day.
Keep in mind, I’m not advocating anything more than being cognizant of these issues, and acting appropriately. For example, here next to Phoenix is a place called Sun City, which is a huge retirement community. I am continually seeing local news stories about how crooks prey on these folks. One recent story was about a 76 year old widow who, over several months, gave away her life savings to a phone solicitor, who has now vanished. Another recent story is how an old scam is being used to get elder people to “temporarily” withdraw large amounts of money from their bank accounts to help a stranger, only to have the stranger vanish with their money. Business owners selling unneeded services to them is another scam that continues year after year. Happens all the time. The local judges could easily pigeon-hole me into this category if a deal is severely one-sided.
I agree that the vast majority of real estate deals are legitimate, and the sellers are mentally clear. But I think it only makes sense to consider the issue and act prudently should the deal seem extremely one sided.
Thanks again…thought provoking and interesting reply.
Stacy