Posted by B.L.Renfrow on December 05, 2000 at 21:04:30:
As you have surmised, appraisals generally aren’t worth more than the paper they’re written on. ESPECIALLY re-fi appraisals have a way of being significantly higher than the actual market value.
Ultimately, a property is worth whatever a buyer and seller agree it’s worth. But if a lender will be entering the picture down the road, it will be necessary to either have comps supporting a sale price or have a plan for dealing with the difference between the FMV and the sale price.
You’re correct about another thing: those numbers ARE big. How many of those $2931 payments could you make before your bank account was in the negative numbers? Holding costs could eat any profit in no time on this deal.
Plus, I’d NEVER lease-option a home from someone in default, certainly not someone THAT far in default. The chances are too great of them being in trouble financially across the board, and before you know it, there are all kinds of liens and judgments attaching to “your” property and then you couldn’t buy it even if you wanted to.
Even if the FMV is in the high end of your neighborhood comps ($350k), there’s no deal there, with a $348k loan balance, which may or may not include the $12k in arrears, plus the attorney fees and other fees the lender will have added on.
The one thing I might try on this sort of deal would be to take an option to purchase for the balance due the lender. Then, I’d market the heck out of it for a couple weeks, at, say $400k and see what happened.
Even in a high-end area, there aren’t going to be many buyers walking around with a $42,500 down payment. If they have that kind of money, they’re probably just going to get a conventional mortgage loan.
Don’t think I’d spend a whole lot of time on this one. There have to be better deals out there.