Help - got heartburn over this one - Posted by SueC

Posted by SueC on October 31, 2000 at 15:18:08:

those are all great ideas, and thanks - I will be sure to add them to my quiver, so to speak. But, the problem with this particular hound is that the property probably won’t appreciate but depreceiate over the next year or two, and the renters who want to rent don’t want to make payments that would even to cover the mortgage. So, rent credits and share in value won’t work.

I dont mind losing, as long as I’ve learned my lesson - dues payment, coming up! :wink:

Help - got heartburn over this one - Posted by SueC

Posted by SueC on October 31, 2000 at 12:50:34:

Well, as a newbie I made two of the biggest mistakes newbies can make, bought in a neighborhood I don’t know, and for a price that was too high. Seller is someone I know, I didn’t want to insult her (but apparently I didn’t mind losing money.)

House appraises at $90K, I offered 75K as-is and it was accepted, have $5K into it already with at least another $3-4K to go - then found out the fireplace needs work for another $2K. Plus - I may have holding costs up to a year on this one, nothing is moving in this neighborhood, there are dozens of props for sale here. I want to back out of the deal and lose the $5K, before I lose at least $5 in holding costs and add’l work. I don’t know about the rental market, but I’m guessing it’s slow too, not a desirable area.

Although some recent comps are in the 95-100K area, I don’t know how long they sat before selling. My asking price is $91,900.

I thought rent-to-own might move a house here, but the calls I’m getting are for folks who can afford about $450 a month.

I figure this is just an expensive lesson, cut my losses and move on. TIA for the feedback.

Re: Help - got heartburn over this one - Posted by Bill Scott

Posted by Bill Scott on October 31, 2000 at 19:41:55:

Randy is right on with his advice–check the appraisal, and also consider backing out on an issue of ‘material defects’.

If that doesn’t work, figure out what is wrong with the neighborhood. Generally, a 90K area is not a war zone–so, what’s up? Right now there is a general slowdown in the housing market in quite a few good areas as folks seem to be holding their breath to see who winds up as President. Also, the loan rate hikes by the Feds are really starting to take a lot of ooomph out of the economy. Things might turn around in a month or two.

Also, see if there is a way to decrease the costs of repairs. Two thousand to repair a chimney is outrageous where I live. I find repair folks for all sorts of things just by driving around in the rental areas and subdivisions and when I find somebody doing good work I ask if they do work on the side. I just got a chimney top rebuilt with tuck pointing for three hundred bucks (about 15 courses worth) plus the cost of the brick which I bought.

Another thought is to lease option the property to someone who can complete the project within about 18 months for the down payment. You get the rent and any appreciation in price.

Anyway, I hate to hear about your misfortune and stories like yours are one of the reasons I wrote my post on flipping down below. Go slow, go careful and don’t be quick to believe the hype about how easy it is to do real estate investing. I have a very wealthy broker who has been investing/buying/selling/listing for forty years and he still gets burned once in a while!

Re: Help - got heartburn over this one - Posted by Randy Banks

Posted by Randy Banks on October 31, 2000 at 18:39:16:

Hello Sue,

Sorry to hear of your problems. I am a relatively new investor but I’m not new to real estate having been a RE Appraiser for past 8 years. You mentioned property was appraised for $90,000. Do you have copy of appraisal or is this just some non-professional opinion. If you have report, read the 1st page for that will tell you about the neighborhood, marketing periods and trends that were observed by appraiser. On the 2nd page of report was value of $90,000 based on “as is” condition or “as repaired”. What were required repairs? Did appraiser fail to notice major structural items? When an appraiser says value is $90,000 or whatever, that is what the property should sell for between a typical buyer and seller and in accordance to the marketing time mentioned in the report. Appraising is not an exact science, but the opinion of value should be consistent with reality.

It sounds like you have not closed yet because you say you are considering backing out?? Read your contract and get professional advice. Were major problems not disclosed to you that the owner would have been aware of or appraiser should have identified?? You may be able to back out of contract and get all money back. Investigate!! And good luck!

Re: Help - how to unload a Dog - Posted by doug,ky

Posted by doug,ky on October 31, 2000 at 15:02:28:

Sorry to hear about the situation your in. Now if you are really fixing to feed an alligator, here are a couple of things you might try. At least you might break even or slightly ahead. Hopefully, no loses.

Rent to own the home using one of these techniques. Advertise good rent credits toward the purchase. Or for the real Bow wow, Advertise the “rent to own below market rents” using the Option consideration to buy down the monthly paynments. (No Option consideration credited torward the purchase). Or, advertise “rent to own at payments you can afford to make”. Same thing here, buy down the monthly payments with the option consideration. Or, equity share with another investor (partner). Let the investor cover the negative and give him a cut in future profit and/or tax saving. Or, use the Pac trust (its just like equity sharing with the
T/B). Or, advertise “rent this home for 2 years and I’ll give you half ownership”. Except you don’t go on the deed with them but give them half the appreciation after two years. v Either they buy it or the house goes on the market with them making the payments until sold.

Just put your numbers togather, and figure out what works. If your having trouble with any of these ideas just put it back on the board.