Posted by Brent on October 21, 2000 at 22:17:54:
Rephrase that to, “IF it realy (would sell quickly )for $133K then @ 119K you get a 10.5% discount.” Echoing the other posts, things are not always what they seem.
AM I MISSING SOMETHING - Posted by rhonda
Posted by rhonda on October 21, 2000 at 17:31:15:
I will try to be brief. I just talked to a woman with a 2387 sq. ft. home that has been completely remodeled. Here are the details. She and her husband bought the house and did the rehab. She stated that she had an 08/00 appraisal for $133K. She is asking $119K. She will L/O the house for $2000 option money, and payments of $1255 per month with credit of $200. I asked about a lower payment without any credit, ie $1000 per month with no credit, and she said that she couldn’t do that because she was simply passing on the debt service on her existing financing, and stated that I was welcome to verify that information.
My assumptions are that they bought on the cheap, did the rehab, and now is wanting to get her money, and will L/O in order to get the deal done.
My question is what am I missing here? Pros I need advice, because if there is a deal here, it wont last long, andif there is not, then my time will be better spent looking elsewhere.
Thanks a million everyone,
Rhonda
Re: AM I MISSING SOMETHING - Posted by JohnBoy
Posted by JohnBoy on October 21, 2000 at 22:53:44:
First of all, FORGET about HER appraisal. VERIFY with ACTUAL comps on homes that have SOLD within the last 6 months to get a true value on the property. Appraisals don’t mean jack! If I appraised your house for $133k and all other houses like yours in your neighborhood have recently sold between $115k - $120k, then that appraisal becomes worthless! Wouldn’t you agree?
If she says the rent credits are simply passing on the current debt service, then where will she get the money to come out of pocket at closing when you exercise the option??? If her payments are $1255, then her mortgage balance will be getting paid down a LOT less than what your balance owed would be after giving you $200 in rent credits. The only way this wouldn’t happen in this case is if she is selling you the property for a lot more than what she paid for it. This means that although she is giving a $200 rent credit while her mortgage payment is the same as her rent she would be getting, she actually giving you rent credit from her equity in the property, which is the difference from her mortgage amount vs. her selling price to you. What does she OWE on the property?
If you rented for 2 years and got $200 a month in rent credit, then your balance owed would be $119k - $2k down = $117k - $200 x 24 months = $4800 = $112,200 at the end of two years to exercise your option. So you know she owes at least $112k or LESS in order to sell to you at $119k - $2k down plus $200 a month in rent credits.
What are other homes like this one renting for in the same neighborhood?
If she’s looking to just cover her payments on this deal then just offer to take over her mortgage “subject to” to solve HER problem! That is, IF she is having a problem and she is “motivated” to get out from under this.
Re: AM I MISSING SOMETHING - Posted by Laure
Posted by Laure on October 21, 2000 at 20:10:31:
Her payments really could be 1255/month, with taxes and insurance. It all depends on the amount financed, the amortization period, and the interest rate.
The thing I would question is the appraisal. I can personally get an appraisal for any amount I want. So, I don’t put any faith in “appraised value”. I want to see comparable sales on that street, or on the next street, and figure my value myself.
She could have gotten in over her head and just need the payment made. Who knows. There is a rehab going on around the corner from my house right now. I know they are in way over their head. I bid on the property also, I know what the repairs are going to be, and I know what it will retail for. They are either going have to offer attractive financing to cover their butts, or take a bath on selling price and lose their butts. Maybe your seller is in the same boat… just trying to reduce losses by offering attractive buying terms.
Even seasoned investors make rehab mistakes sometimes. Just ask me ! LOL I bend over backwards to make a deal go through, get my profit, and go on.
If you want to know the real value of the property, get some comps yourself. www.iown.com has some comps you may be able to use. or check with a realtor.
Laure 
You may be learning something! - Posted by Jim LaVerdi (Phx_Az)
Posted by Jim LaVerdi (Phx_Az) on October 21, 2000 at 17:51:46:
This person doesn’t sound much like a “Motivated Seller” She sound like someone who is an investor jusl like yourself.
You can go out and get a loan for $119,000.00 @12% interest and have that kind of payment! If that’s their debt service then they messed up somewhere! Furthermore if I was going to take her up on a lease option I would certainly try for $0.00 down! I would offer to do all of the maintenance and repair throughout the term of the lease option in lieu of the down money. You also said the seller is offering “RENT CREDIT”! Your everyday sellers don’t offer rent credit, and as a matter of fact a seasoned investor wouldn’t either.
I’d pass on this one and continue on… or I’d make the offer that suited me and say… Take it or Leave it!
Jim LaVerdi (Phx_Az)
Re: You may be learning something! - Posted by rhonda
Posted by rhonda on October 21, 2000 at 18:30:04:
Thanks for the input, while I was waiting for replies, I made another 3 phone calls and tried to find another deal. The only money appears to be on the back end. IF it realy appraised for $133K then @ 119K you get a 10.5% discount.