Am I wasting time or is this possible? - Posted by Tony (CA)
Posted by Tony (CA) on July 09, 2001 at 14:43:40:
Unusual callback. Two months ago I first received a call on my ad. The sellers were sick of California. They wanted to move back to Houston. House was on the market with the wife’s step-father, a realtor, for $380,000. Turned out they were unemployed and hadn’t paid the mortgage in 4 months.
Next, I learned from the wife that the house was actually bought via a trust that was set up for these two kids. The step-father is the gardian of the trust. The tax records show a mortgage was taken on the house. I looked at the house. The house didn’t need much work, but they were being unrealistic about the price. Wouldn’t sell for less than $335,000. I figured that was about 88% FMV. Too skiny to flip.
Saturday I received another call from the wife. Their plans have changed. The husband is taking a job about an hour’s drive away and they want to move to a closer city. She tells me they put in new carpet and did some other renovation. Was I still interested? I explained that I only buy homes that I can resell and make a profit. She says they have some bills they wanted to pay off.
I thought it might make sense to lease option the house, so I asked how much they needed to move. She didn’t know and asked me to call her step-dad. I was thinking about having their trust carry the mortgage. I’m hoping to find out from the stepdad how much money is in their trust to determine if they could use their trust to buy a new home that’s closer to the husband’s new job and continue to finance this house that I’ll either lease option or just sell.
It would be helpful to me if you have any advice about ways to structure the financing. I’ve never done a lease-option and I’m wondering if I’m missing something. For example, the difference between their selling price (let’s suppose they will come down to $325,000) and the loan balance ($280,000) is $45,000. If I were to receive option consideration of 5%, $19,000, I’m still looking at investing $26,000. If the option is exercised, there’s a $36,000 backend. Only now am I $10,000 ahead, not to mention the monthly spread.
Seems awfully complex and not to profitable. Am I missing something?
Sunday night I received a third call from the wife. Two calls in two days. This fact is making me feel she is motivated and perhaps I can structure a deal that will be more profitable. On the other hand, the stepdad will need to be involved and will not have the same degree of motivation.