Posted by Brent_IL on May 24, 2002 at 01:58:39:
Dean,
You?re making a retail offer on this house.
This would be too thin for me to put $10,000 down unless I had a solid T/B or R/B waiting in the wings with 5%+ option consideration, and I could make something on the spread. I?d have to be extremely confident in my buyer?s ability to perform. $8,000 is still too much for me on a deal this thin. Just because a seller will hold a second doesn?t make the deal profitable, or creative.
If the house is truly worth $210K, you should be able to exit at $235, as planned, by offering owner-financed/ no-bank-qualifying terms. However, understand this. Renting it out is exactly what you are doing, albeit at higher rent and with possibly lower expenses.
IMO, two years is not long enough for a T/B to be in a position to exercise. They won?t even have time to get the tax benefit of a full year?s interest. When the $16,000 comes due, you?re the one who will be writing a check.
I?ve had some small success in extending balloons by agreeing to increase the payments annually. I use a fully-amortized schedule with the monthly payments increasing by 2% in the third year, and increasing annually by 2% each year until the balloon comes due in 10 or 15 years. The interest rate stays the same so it all goes toward principal anyway, and it gives me time to go through a real estate cycle, or two.
She doesn?t appear to be all that motivated. Payments are current, she hasn?t bothered to list it, and she?s waiting for you to put only 5% down. I?d re-think the down payment in light of the reward/risk ratio. It seems like the seller is dictating the terms of the sale.