Buying with $0 down ! - Posted by Rob (Atlanta Ga.)

Posted by Redline on December 30, 1998 at 13:58:05:

Giving the seller $500 down would only work if you could work a deal with the realtor to pay his/her commission over time. You could use your cash flow to do this.

Buying with $0 down ! - Posted by Rob (Atlanta Ga.)

Posted by Rob (Atlanta Ga.) on December 30, 1998 at 11:36:12:

I found an EXTREMELY MOTIVATED SELLER. The scenario is this:
*No repairs
*2 bedroom, 1 bath
*Appraise value $60,000,
*Va loan
*Monthly note: $475.00
*30 day payoff: $43,837.00
*Listed with Real Estate Agent: Dec.7,1998 (6 months)
*List price: $55,000
*Good retail and section 8 rental neighborhood

The seller has a family and they’ve grown out of there current home and after speaking with him. The seller is very willing to take only $500-$1,000 to go ! In his own words “he doesn’t need alot of cash” They just need to get into a bigger home. The seller calls me every other day to see if I’ve worked out the deal yet ! I was referred to him by a friend whom I’d just sold a house to so…

How do I get this house with $0 out of pocket cost because my credit is not the best. I just bought my own home 5 months ago and I have $10-15,000 in equity in it, but how can I purchase this home and solve this seller’s problem and also get rid of/satisfy the real estate agent ?

Re: Buying with $0 down ! - Posted by JohnBoy

Posted by JohnBoy on December 30, 1998 at 13:56:37:

You mention the seller will take $500 - $1000 to go! Does this mean the seller is willing to take the $500 - $1000 above the payoff amount or take $500 - $1000 down based on the $55k listed price? What does a 2 bd home in this area rent for?

One way to get into this deal with 0 out of your pocket would be to get the property under contract based on the terms you and the seller agree to and put a clause in the contract that states “This contract is subject to buyer placing a suitable tenant prior to closing.” Then run an ad in the paper offering the house on a rent to own. You should be able to get at least $3000 or more as non-refundable option consideration plus first months rent.

Use the $3000 option consideration from your new tenant buyer to pay the seller his $500 - $1000 he needs. You also stated that your credit isn’t that good but you purchased the home you live in 5 months ago. How did you buy this? Owner financing or did you get a bank loan? If you qualified for a bank loan you for the mortgage you should be able to walk into any finance company and get an unsecured loan for $2500 - $3500. They will basically list it as secured against household goods. Furniture, stereo, tv, etc. You could use that money to pay the seller and pay off the loan when you get a tenant buyer by using the option consideration they pay you. If you use a finance company make sure you pay that loan off as soon as you get a tenant buyer. The interest they charge can range from 20% - 45% depending on the state you live in. If you get a tenant buyer within 30 days you can pay off the loan without paying any interest. Don’t tell the finance company what your really using the money for or they won’t lend it to you. They give these type of loans on more stupid things like, buying new furniture, a ring for your wife, a vacation, or you want to put up a new fence in your yard or finish your basement in your house, etc. Finance companies that do these loans are places like Commercial Credit, Norwest Financial, Transamerica, Beneficial, etc.

You asked how you could satisfy the realtor? What did the seller say about satisfying the realtor? The seller is the one with the problem to satisfy the realtors commission. If the seller wants you to put up enough to pay the realtors commission on top of the $500 - $1000 he needs you can try to work out a deal with the agent. First thing I would is sit down with the seller and his agent together to try and work out an arrangement with the agent. Since you found this deal without the agent being involved I would tell the agent that I have an agent I work with on a regular basis, (even if I don’t) I would ask the sellers agent if they would be willing to finance their commission over 2 years at 6% interest? (start low with the interest then work up to a higher rate if you need to)

The agent may tell you they can’t do that or wouldn’t be interested in financing their commission. At this point I would say, thats ok, I understand your position, but I also want you to understand mine. If this deal is going to work I will need the agent to be flexible on terms concerning the commission. As I stated before, I have an agent that I work with on a regular basis. My agent will carry any commission he gets from my deals. If you can’t be flexible I understand. I’ll bring my agent into the deal so I can at least get half the commission financed. Then you will get the other half paid in full.

At this point the agent may say, well I’ll agree to carrying half. I would say that’s mighty generous of you, but I don’t need you to carry half. I already half an agent that will carry half. If you will carry the full commission then I’ll leave my agent out of the deal. Otherwise I feel I have an obligation to my agent to bring him into the deal since he always works with me on any deals we do together. But if your willing to carry the entire commission, I can justify leaving my agent out of the deal since you would be flexible enough to carry 100% of the commission.

The agent may ask you who your agent is? I would just say thats not important at this time. I don’t want to bring up my agents name in this conversation if your willing to carry 100% of the commission. Otherwise I’ll have my agent get in contact with you once I bring him into the deal.

If you don’t have an agent you already work with, then start calling around to different realtor offices and find one that works with investors. When you talk to them, tell them you have a deal your looking at and would be willing to bring them into the deal right now if they’re willing to carry their half of the commission. This is FREE money your offering them that they would never get if the listing agent would have agreed to carry the full commission. Would you except an offer like this?? I would if I were an agent. Free money over 2 years plus a sale added to my portfolio! Call me anytime you need me on your future deals!

Assuming your paying the $55k and the realtors commission is 7% (I’m using the highest numbers here since you didn’t say what your actual price of the property would be and what the realtors commission is) the commission on $55k would be $3850. Half of that would be $1925 plus $1000 to the seller = $2975 total cash needed to close this deal. If you offer the property on a lease option to your tenant buyer, you should be able to get at least $3000 down as non-refundable option consideration plus first months rent. The $3000 down from your tenant buyer would cover the cash you need to pay the listing agents half of the commission and the sellers $1000 he needs. If you end up getting $5000 down you would put $2000 cash in your pocket up front.

Thats one way to get in with 0 down and satisfy the listing agents commission.

So, he says he does not need… - Posted by Soapymac

Posted by Soapymac on December 30, 1998 at 12:57:11:

a lot of money, does he?

This begs the question, “how much does he need?”

The next question you must answer is where are you going to find the money?

Looking at this from a retail point of view:

Assume he gets his price of $55,000. His outstanding mortgage is $44,000 (I’m rounding here.) That leaves him with $11,000 MINUS any selling and closing expenses. The commission paid, at 6%, is $3,300 alone, and his other closing expenses could take another $2,000. That would leave him with $5,700, or thereabouts, to put towards his new home.

My quick and dirty suggestions are:

  1. What is your “nut” if you rent this house out and plan FOR ONE YEAR to have a zero cash flow? (i.e., no money out of your pocket, but no money into it, either.) If you can’t get a rental to cover this, the house is an “alligator.” You don’t need it.

Assuming you can do this…

  1. Have him withdraw his house for sale from the broker, AS LONG AS YOU WERE IN THE PICTURE BEFORE THE HOUSE WAS LISTED. Otherwise you could be in trouble with the broker, or put this gentleman in trouble with the broker for a commission due.

  2. Find a way to take over his mortgage payments (the 1st, and there have been ways to do that which are discussed on this board.)

  3. Have him take a 2nd (5 year balloon) at 12% for his $5,700 equity such that you pay him 1% per month on his second ($57) with the balance to reduce the balloon (should come down to about $4355).

  4. At the end of 5 years do a refinance and pay him off. You could have him pay the closing costs and add that to the second.

Last question: why is he so anxious and calling you every other day? Does he have his other house waiting for him and he needs to get rid of this one?

Maybe you could get a home equity loan on your place, take over the payments on his present house, and you give him $5,000 and you cover the closing costs?

This is all predicated on the fact that you can get the house rented at a zero or positive cash flow. If that can’t be done…walk.


Re: Buying with $0 down ! - Posted by reif

Posted by reif on December 30, 1998 at 11:45:41:

I’m a new guy, but hang on a second here.

Appraised at $60,000, but can’t sell for six months at $55,000?

If you could get it for just the cost of the mortgage ($475) with nothing down, what would you do with it? Will the rents support the mortgage, the insurance and the taxes?

If you’re planning to flip it, what price would you expect to get for it right away?

Seems to me the key phrase around here is “Make your money going in.”

I’m not seeing it, although I’m a new guy and maybe that’s why.


What you may be missing… - Posted by Soapymac

Posted by Soapymac on December 30, 1998 at 12:25:07:

is the interpretation of the information.
The house appraises for $60K.
The gentleman put it on the market for $55K…snd he put it on the market with a broker in December of '98.

That is a motivated seller…at retail, anyway.


Re: What you may be missing… - Posted by Redline

Posted by Redline on December 30, 1998 at 12:44:24:

Yes, I think the 6 months he was referring to is the life of the listing taken in December. (i.e. the listing will run until June somethingOrOther.

As far as this property - will rents carry it? Perhaps a L/O would work for you. Get more of a discount, use the optionees money as down (get $3,000 down and give your seller $500) and make >= $5000 on the back end.