Posted by Mr. C on November 07, 2002 at 14:02:17:
I understand, I’m just saying this is a high risk situtation due to the 13 being open yet.
Due to that, I like the renting solution… extending more credit isn’t the answer here.
Help! Opinions on Selling to Buyer in Chapter 13 - Posted by Lyal
Posted by Lyal on November 07, 2002 at 11:09:04:
I have a potential buyer interested in one of my mobiles. They filed Chap 13 a while ago and are in the “reorg” phase with a payment of 700 a month due on their pre BR debts. Just FYI… I usually sell on a Contract where I hold the title until they pay me off. They have 2 grand for a down (price is 20K on this home) and have no problem with a 350 a month payment. No issue with getting them approved as I own the lot on this one. My concern is that they’ll get into the home and then go to Chapter 7 and I’ll get screwed but I like the 2K down idea.
I was thinking of maybe selling on a lease / option kinda deal on this one (again no problem with the “no renting” mentality here as I own the lot) which I’ve never done before. That way if they don’t pay I can just evict (I think).
Thanks for any opinions, Lyal
PS: They have a house now but no equity and are just planning on letting that go back to the bank.
Re: Opinions on Selling to Buyer in Chapter 13 - Posted by Mike(Al)
Posted by Mike(Al) on November 08, 2002 at 24:49:18:
Lyal,We finance for people who banks will not touch. One of the best deals I have ever made was with two doctors who had twins both with downs syndrone.The medical bills ran over $2,000,000.00 after their medical coverage was tapped out.They had a home in one of the top neighborhoods in the Birmingham,Al. area.The home appraised for over $800,000.00,I was able to buy it for $300,000.00.They had a mortgage of >$100,000.00 and the hospital was willing to accept $200,000.00 to satisfy the hospital bill. Since I received such a good deal on their house,I gave them a DW on 3 Acs. in order to help them get on their feet.They were not in bankruptcy.Sometimes bad things happen to good people.Using your gut instincts,how do you feel about these people.Have them get a co-signor with good credit,if you need to feel comfortable.
Re: Opinions on Selling to Buyer in Chapter 13 - Posted by Quint-OH
Posted by Quint-OH on November 07, 2002 at 22:13:49:
Lyal,
Just a few things to ponder.
Approximately 65% of all ch.13 are never completed,they move on to ch.7.
If you take a large security deposit or option deposit and your buyer files for ch.7 I guarantee you that the bankruptcy trustee will come knocking.
If your buyer or renter happens to be behind in his payments or he just decides to list you as a creditor he will get an automatic stay (meaning no more checks) until you get a hearing with the trustee and get the stay rescinded. Then you get to go through the eviction process.
There goes that 2 grand,that is if the trustee let you keep it.Secured creditors get first dibs.
So in my humble opinion I would look for a different buyer, it ain’t worth it!!!
Re: Help! Opinions on Selling to Buyer - Posted by ScottS(NC)
Posted by ScottS(NC) on November 07, 2002 at 12:45:17:
Lyal,
You hit the nail on the head in my opinion. 2K option consideration is a nice incentive to risk RENTING with the option to purchase.
What you should consider is telling them your going to do a straight rental for the first year(because of there extremely shaky credit). Collect a large security deposit plus first and last months rent and if they have a pet how about a nonrefundable pet deposit(mines $100) totaling up to say 2k? Then tell them if everything is ok after the one year mark you will allow them to do a straight purchase from you and the security deposit and last months rent will be applied to the down payment. This way you collect a years worth of rent before your payments even start. And if you do have to evict there is no issue with how much equity they have built up in a lease option I don’t know MN eviction process but here in NC I can have a RENTER out in 30-45 days tops. Lyal once you recieve a very nice hunk of taxes back from depreciation(renting) ect… you may decide a few rentals are worth the time invested. I also contend that if you are doing a bunch of rentals and a few Lonnie deals you can sell on installment instead of being hit with the taxes all at once. The benefits to renting go on and on! I will get of my soapbox now. Take Care lyal, ScottS(NC)
Re: Opinions on Selling to Buyer in Chapter 13 - Posted by Mr. C
Posted by Mr. C on November 07, 2002 at 11:21:38:
The reason they’re in 13 is because “they have a house now but no equity”… and the fact that they’re “planning on letting that go back to the bank” would scare the hell out of me.
No bank in the country is going to make these people a loan, until the 13 is settled… why would you?
An instructive and helpful post!NT - Posted by John Merchant
Posted by John Merchant on November 07, 2002 at 20:10:19:
x
Re: Opinions on Selling to Buyer in Chapter 13 - Posted by Lyal
Posted by Lyal on November 07, 2002 at 13:06:24:
Mr C.
Thanks for your reply.
I don’t want to make excuses for these people as they’re not kids and got themselves in this fix but…
The reason they’re in Ch 13, actually is because they had 2 babies in unexpectedly quick succession (none since) and went to a single income with extra medical bills. They refinanced the house to try and catch up but couldn’t. Got a rude lesson in how skewed refinance appraisals are.
Making the payments on the Ch 13 is at least some indication that they want to make good on their debts otherwise it would have been Ch 7.
As to banks, we here on this forum deal specifically in a market that banks won’t touch. That is what drives the tremendous yields that are possible. Any one of the people we sell to could declare BK at any time. My main concern is IF it happens in this case (because these people have already taken one step in that direction), how do I recover. Reselling to another buyer doesn’t hurt me a bit (better many times because I get to collect another down payment and get a new note signed for more money) but I don’t want to drag things out with a court fight.
So to answer your final question, I’d make the “loan” to get the 2K down payment and start collecting rent on the “dirt” under the home.
All the best, Lyal
Re: Opinions on Selling to Buyer in Chapter 13 - Posted by ScottS(NC)
Posted by ScottS(NC) on November 07, 2002 at 12:55:55:
Mr.C
Here in my neck of the woods the only type of buyers I can find typically for my older homes are people with substantial problems. I have had some folks in Chapter 13 that were there because of huge medical bills and other bills behind because of the medical condition. Just saying “No bank in the country is going to make these people a loan, until the 13 is settled… why would you?” Is not solving problems and leaves alot of potentially great clients out. In my opinion you need to investigate reasons for there problems, then decide if these folks are villians or victims. Take Care ScottS(NC)
Re: Opinions on Selling to Buyer in Chapter 13 - Posted by Mr. C
Posted by Mr. C on November 07, 2002 at 13:13:29:
My main concern is IF it happens in this case (because these people have already taken one step in that direction), how do I recover.
That was (is) my concern as well.
Re: Opinions on Selling to Buyer in Chapter 13 - Posted by Mr. C
Posted by Mr. C on November 07, 2002 at 13:04:36:
One of the conditions of a 13 (or 7 for that matter) is that you can’t make any new debt while it is pending… that means no bank or finance company loans.
The only way that they could buy a home while still in a 13 would be to do so via seller-financing.
In any event, for my money they’re a high risk situtation… renting as suggested in the other post would be acceptable however.
Re: Opinions on Selling to Buyer in Chapter 13 - Posted by Lyal
Posted by Lyal on November 07, 2002 at 13:43:52:
That’s not the way it works!!!
You’re supposed to have the answers not restate the questions!!! B-)
Well my answer was to use the lease / option approach. Get a non-refundable option deposit (how’s 2K sound??) and if they don’t pay, I evict and find another buyer.
(Hint: I was looking for other ideas here…)
All the best, Lyal
Re: Opinions on Selling to Buyer in Chapter 13 - Posted by ScottS(NC)
Posted by ScottS(NC) on November 07, 2002 at 13:18:37:
Mr.C
I Think if they can no longer afford there current home because of high payments(I take it)and it is going back to the bank, the issue of more debt is irrelevant because we all need a roof over our heads and will get one regardless of what Ch.13, or Ch.7 have to say about it. The main reason Lonnie deals exist is because most mobile home buyers are high risk, banks won’t touch them. This is our niche. Take Care ScottS(NC)