A New Wrinkle - Posted by Pat

Posted by sgt.sausage on July 25, 2008 at 14:27:21:

==> and they are starting out with some 65k in equity.

I would argue that they do not have 65k in equity. The price was reduced exactly because no one was silly enough to willingly pay the $125K ask.

Equity is not calculated based upon some moron’s “original asking price”. Equity is based upon what would you get if you sold it today. Seems to me they’ve got a $60K place with no equity… nothing wrong with that, though.

A New Wrinkle - Posted by Pat

Posted by Pat on July 25, 2008 at 09:03:10:

We recently were able to help our daughter and son -in-law purchase their first home. They found a repo held by an out of state lender desperate to unload it. The original asking price was 125k but within 4 months it was reduced to 60k. They were approved for a loan through our state housing authority program when they were told that the property would have to remain in our possession for a minimum of 90 days as per FHA rules. While this was not really a problem as far as we were concerned, our kids were somewhat disappointed.

During the appraisal, the appraiser mentioned that she often worked with a mortgage broker who was particularly sharp. As investors we’re always looking for new contacts and gave her a call. While discussing the types of deals we do, the subject of the kids came up. Since we hadn’t purchased the property yet, she suggested we put the kids’ names on the title with ours. By doing this, they could immediately after closing, refinance the place without the waiting period and without the 5k closing costs originally requuired by the other lender.

The end result is they got their place with minimal out of pocket expenses, in minimal time, and they are starting out with some 65k in equity. Oh yeah…we did our usual no money down deal with our lender to initially obtaain the property. While we left over 60k on the table to make this work, being able to help our kids builds an equity that isn’t affected by the market.

Re: A New Wrinkle - Posted by Jack

Posted by Jack on July 25, 2008 at 16:34:16:

Where is it that you are leaving $60,000 on the table? Were you actually thinking of selling the house, the house you said they had found, back to your kids for $120,000?