In trouble here.... Condo won't sell. - Posted by Fred

Posted by Frank Chin on April 19, 2001 at 06:45:56:

In trouble here… Condo won’t sell. - Posted by Fred

Posted by Fred on April 15, 2001 at 17:12:47:

I recently decided to purchase a new home that will be built in August. I put both properties that I owned up for sale and my home sold quickly. My rental though did not. It has been listed since December and so far not one single taker. I tried lowering the price. I tried offering up to eight percent commission so more agents would show it. I tried offering to pay all closing costs, but so far nothing. I even put an ad up myself in the local paper.

Here’s a description of the property. The condo has been empty for a few months now and it’s in very good shape. 2/2 condo. 900 sq feet. Beautiful inside and out, but here’s the kicker. The house is not in the most desirable part of town and it has a balcony that faces an alley. It made good money for me as a rental. What can I do to bring buyers in? Should I market it it to investors?

The condo is in Long Beach California. I owe about 56000 on it and I have it listed for 84900. CUrrent market is about 90,000. I could lower the price even more, but I need to make close to 18,000 from the sale to move into my new home.

Any suggestions would be helpful.


Re: In trouble here… Condo won’t sell. - Posted by mark-ga

Posted by mark-ga on April 16, 2001 at 19:43:01:

Try marketing to investors AND taking back a 20% second mortgage.

In my area, banks will lend 80% if the seller takes back 20%. These loans are easy to get and are done all the time.

You sell for full market value, and the investor gets your condo for no money down. Hopefully, it will cash flow for the investor.

For example:

Sales Price = 90k
New Loan = 72k
New 2nd = 18k

You walk away with the cash you need and get $18k down the road. You can make the terms on the second very affordable to help in cash flow better.

I am selling one now like this. The Section 8 rents are $1200 / month and the buyer’s note will be about $750 / month. I get some of my profits now, some later and $100 / month until it cashes out. The Buyer gets in for no money down…

Sell it FAST with owner financing… - Posted by Michael Morrongiello

Posted by Michael Morrongiello on April 16, 2001 at 18:24:13:

I am not big on you taking on further debt and liability just to get your cash out of this condo unit. Also most loans these days contain prepayment penalities which you might get hit with if you attempt to pay off this refinancing shorthly after you obtain the loan.

Shame on you for lowering your sales price without first trying to sell this condo unit by offering owner financing to the marketplace.

Offering a property to the marketplace with OWNER FINANCING is a proven way to both agreesively market and finance the sale. In short - it works…

We buy paper day in and day out all over the country. We have seen time and time again Realtors, investors, etc. lower their asking price rather than offering FINANCING terms to move a property fast.

You should try blitzing the market with an AD similar to the following:

$5,000 Down, $ 830 per month
Owner will Finance
No Bank Qualifying
Lovely 2/2 condo, etc. call today!

You will sell at the $90K asking price, get your $5K cash down and then finance the $85K balance by taking back a 1st lien trust deed and note for $76,500.00 amortized over 360 @ 11.5% payable $757.57 per month. This is the note that will be sold either at closing or shortly thereafter and converted in a LUMP SUM cash payout. You will also retain a smaller $8,500.00 2nd lien trust deed.

With the right structure, buyer, terms, etc. that 1st lien trust deed can bring somewhere in the $72,500.0 to $73,500.00 cash value range. These funds along with your $5K down payment should still allow you to pay off your existing debt and realize the $18K cash out that you need. Additionally you will retain a smaller $8,500.00 2nd lien deed of trust that can pay you monthly “interest only” payments of lets say around $71.00 per month for a few years and then you can ballloon this smaller 2nd lien and get your full $8,500.00 principal repaid to you. (This is where we obtained the $83.00 payment for the ad (the $757.57 payment on the 1st lien, along with aprox. $71.00 on this 2nd lien note totals approx. $830.00)

Hope this helps and if you need some assistance to make this happen, feel free to contact me.

To your success,
Michael Morrongiello

Refinance and then sell with Owner Financing - Posted by Monique

Posted by Monique on April 15, 2001 at 17:40:38:


I don’t know how you feel about taking on more debt, but what about refinancing the condo to pull your cash out?

If the condo is worth $90K, you should be able to do a non-owner occupant refinance at 80% LTV, or $72,000. Pay off the $56,000 and pocket the $16,000 (minus closing costs). In some markets, you can even get a non-owner occupant refi at 90% LTV, and then you’re home free for your $18,000.

After you get your cash with a refi, you could the sell the condo with owner financing – at more than the $84,900 that you have it listed for and save yourself the 8% commission.

You could market the property at $89K (or even $95K) on a Lease/Option or on a Land Contract. You get a down payment from your buyer and a monthly spread on what your buyer pays you vs. what you pay on the refinanced loan.

Run an ad that says something like:

Owner will Finance
2/2 condo in excellent condition.
$93,900. Down payment required.
Shaky credit OK. Available Now.
Call Fred at 555-1234.

Or, once you pull your cash out, you can just keep it as a rental if you wish.


Mike - Need some Suggestions too … - Posted by Frank Chin

Posted by Frank Chin on April 17, 2001 at 06:41:19:

Hi Mike:

I’m in a similar situation as Fred.

I listed a 1BR/1Ba Condo for sale in Springfield MA with a broker since December. So far not much as happened. The broker blamed the bad winter. But its not in one of these HOT sellers markets.

The condo had a HUGE living room where we built a den which can also be used as a second bedroom.

Purchase price was 42K back in 1992, and had successfully rented it out since. Because a new courthouse will be built right across the street, we think it should increase in value in the years ahead, and a good time to sell.

Also, I just sold a property in New York City, which will close next week. One thought was to take some of the cash and pay off the relatively small mortgage on this Condo.

The numbers:

Listed at 71K and reduced to 69K at brokers suggestion.
Mortgage: 32K, monthly payment: $385.00
Condo Fees: 150/month
Monthly Rental: $575.00

I’m told there’s been a few interested buyers, but the obstacle’s been the down payment. I was also told that the City of Springfield has grants available to first time buyers of SFH, and this luxury Condo does not qualify. One interested buyer had checked and told the broker.

I think this been working against us.

The Broker listing will expire the middle of May. I’m considering FSBO using 100% owner financing. I’m planning to increase the price if I do this, though I haven’t decided by how much.

My questions are:

1- Does it make more sense to keep the current mortgage and wrap with a new mortgage ?

2- If I wrap with a new mortgage, how much interest should I charge?

3- If I pay off the current mortgage, should I structure the notes as follows (for 100% financing):

a- One note for 85% of FMV (to be sold)
b- One note for 15% of FMV (to be held)

and what should the interest rate be??

I looked at your WEB site, and noticed that you buy notes at 85% LTV, hence, the creation of one note for 85% of FMV.

Of course, another option we have is paying off the mortgage, and rent a free and clear property that appears to have some upside.

Or L/O this to someone and do the financing as step two of the process.

Any Suggestions?? Thanks.


PS- I live in New York City, but plan to camp out in my condo if it looks like I can make a go of selling it with owner financing. I’m doing RE full time at this point.

Re: Sell it FAST with owner financing… - Posted by Ronald * Starr

Posted by Ronald * Starr on April 16, 2001 at 21:34:42:

Adding on this suggestion from Michael:

Suppose you could get your builder to take the second lien as part payment? Point out the benefits to them: a little monthly cashflow to help pay the bills

Good Selling==========Ron * Starr

Your deal that won’t sell… - Posted by Michael Morrongiello

Posted by Michael Morrongiello on April 17, 2001 at 22:30:26:

Certainly you can try to offer this property to potential buyers with owner financing as both a marketing and financing tool to Agreesively expose this property to the marketplace…

As for some of your isssues:

1- Does it make more sense to keep the current mortgage and wrap with a new mortgage ?

If you want to exert some extra control over the financing, then you can set up the sale to a buyer and hold a “wrap around” type mortgage where the buyer will pay you and you will continue to pay the underlying lienholder. When we purchase your “wrap around” instrument we would simply pay off the underlying liens…

2- If I wrap with a new mortgage, how much interest should I charge?

This is highly dependent on the quality of buyer you attract (how much cash are they putting down, what is their overall credit profile like, their credit scores, employment, stability, etc.)- I would try to finance the buyer in the 11% -12% range if you can and stress to the buyer that there is NO prepayment penalty on the financing for them. You will get them into the home, however you are not a bank and thus must charge a little more than other lenders in the mortgage business. After they have been in the home and have demonstrated they can pay for 12 + months timely on this mortgage, they can attempt to refinance the loan to the VERY lowest terms they can qualify for…

3- If I pay off the current mortgage, should I structure the notes as follows (for 100% financing):

a- One note for 85% of FMV (to be sold)
b- One note for 15% of FMV (to be held)

A sale where the buyer has obtained 100% financing would be percieved by us as being VERY risky. We like to see prospective buyers put down 5% or have at least 5% equity in the property…

and what should the interest rate be?? - this was addresed above.

Start running your ad, get some phone activity, and start screening and filtering out prospective buyers for you unit. We are more than willing to work with you as a potential funder for this “paper” to both assist in the structuring and then purchase of it from you at some point in time, thereby providing you with cash liquidity.

To your success,

Michael Morrongiello

PS. I almost forgot, I would not recommend paying off the existing financing unless you are resolve to accept the fact that you are tying up your cash into this property and investing it in essence at whatever the approx. rate of interest is on the loan you are paying off. Over time, you can probably do much better having the cash available to you to invest over and over again rather than it being tied up in this property.