Posted by Mark (SDCA) on September 12, 2006 at 16:16:36:
I mostly agree with the others. The only possible option would be messing around with the finances. You don’t go into details but it sounds like they have multiple mortgages on the property. Can one (or more) of those be bought at a STEEP discount? That might make it worthwhile.
GL
Mark
Deal Advice - Posted by Ben
Posted by Ben on September 12, 2006 at 13:10:00:
Hi All – thought I’d post a potential deal and see what advice there is to be had. Not sure if this is proper etiquette or the proper medium, but here are the details:
Appraised value 340k
Mortgage balances 310k
(30k in equity)
Seller wants 10k to pay off personal debts
Seller owes additional 14k to relatives. Relatives don?t need payback right away.
Seller will rent back at 1500/month max
Seller is relative of buyer
Comments?
Equity - Posted by Joe Kaiser
Posted by Joe Kaiser on September 13, 2006 at 05:33:15:
$340-$310 does not equal $30.
It never has or will.
We disregard the top 20% because it’s largely air. That’s why lenders
often will only lend up to 80% of value. The top 20% can evaporate in a
heartbeat.
Take off 10% for closing costs and 10% for a declining market or just
because most people choose not to pay retail, and that 20% is gone.
Your deal has zero equity, or less.
Joe
Re: Deal Advice - Posted by Alisa
Posted by Alisa on September 12, 2006 at 19:32:30:
Ben,
When I read the post, my first reaction was “no deal”…of course I read on to see if others concurred and they did. One question I would say you have to ask yourself is … “what’s in it for me?”…remember, there is nothing wrong with that. I see the answer as being a hero to a family member who couldn’t manage their finances. Have you figured out how much you are going to make on this and just how you are going to make it?
I agree…unless you can get a huge discount on the mortgage, this could be quite an expensive “deal”.
Good luck!
Alisa
Re: Deal Advice - Posted by Ben
Posted by Ben on September 12, 2006 at 17:00:44:
Though not what I was hoping for, it was what I was expecting. Thanks everyone.
Re: Deal Advice - Posted by FrankIL
Posted by FrankIL on September 12, 2006 at 15:15:38:
A ‘deal’ is whereby profit is made by the buyer. I don’t see any profit here - the home is worth $340K and the seller wants $334K. This is called paying ‘retail’ and buying conventionally. There’s no equity here nor any motivation from the seller for that matter. And the home may never even sell for $340K. Move on…
Re: Deal Advice - Posted by Phila-PM
Posted by Phila-PM on September 12, 2006 at 15:09:37:
No Deal here. Don’t waste your time with this one.
Re: Deal Advice - Posted by Patrick S. Lawson
Posted by Patrick S. Lawson on September 12, 2006 at 13:52:42:
I don’t see any deal there. What I do see if the potential for bad blood between relatives down the line.
Re: Equity - Posted by Ben
Posted by Ben on September 13, 2006 at 08:07:33:
That is a good guideline. I’ll remember that. Thanks.
Re: Deal Advice - Posted by Joe Kaiser
Posted by Joe Kaiser on September 13, 2006 at 02:55:44:
What were you hoping for?
Re: Deal Advice - Posted by Ben
Posted by Ben on September 12, 2006 at 13:58:45:
Could you explain where you see the negative potential, besides debt not being paid back of course. That’s a risk in almost every deal dealing with financing debt.
Re: Deal Advice - Posted by Ben
Posted by Ben on September 13, 2006 at 08:11:43:
I was hoping for someone to suggest a way to make this situation a positive one.
Re: Deal Advice - Posted by Patrick S. Lawson
Posted by Patrick S. Lawson on September 12, 2006 at 14:13:53:
What’s in it for the buyer?
Negative cash flow.
No discount/ built in equity.
It just does not make sense.
Re: Deal Advice - Posted by Ben
Posted by Ben on September 12, 2006 at 14:26:19:
Fair enough. All true. Was hoping to see if anyone had something up their sleeve, another perspective maybe?
Re: Deal Advice - Posted by Sailor
Posted by Sailor on September 12, 2006 at 16:56:03:
Remember, no good deed goes unpunished (especially if it
involves $$$ & relatives).
Tye