Need Help on Structuring this. - Posted by Jim

Posted by Jim on February 16, 2001 at 19:16:44:

1st $199,500.00

2nd $ 12,000.00

Both are approximate but very close to accurate



Need Help on Structuring this. - Posted by Jim

Posted by Jim on February 16, 2001 at 18:36:01:

I have a seller who won’t (Will Not) leave me alone about buying his house!. The house is only 2 years old and in great condition. It’s located on a 1-1/4 acre lot that is very desireable. I saw the property and spoke with him and his wife the other evening and I got them to agree on a subject to agreement (But not signed) they wanted their attorney to review my agreement before signing. No problem…

I do some checking at the court house and find that they have a 2nd mortgage on the property for $12K that they didn’t tell me about and this is where I am at the present time.

I didn’t like the 1st mortgage because it has a 12.5 % interest rate with monthly payments of $2112.00 and that doesn’t include taxes and insurance. The second mortgage has monthly payments of $274.00 per month.

Realtor pulled comps for the area and they come in at $250,000.00

Seller says he needs $5K to move on.

Is this a do-able deal or should I pass? These big numbers are a little wacky with the interest rates involved!! (I offered them a straight option and they really need out and want the subject to deal)!!!

…And people said this stuff never happens!!! Sheeesh!

What do ya think?

Re: Need Help on Structuring this. - Posted by Greg NY

Posted by Greg NY on February 18, 2001 at 01:02:49:


Re: Need Help on Structuring this. - Posted by Bud Branstetter

Posted by Bud Branstetter on February 17, 2001 at 24:32:36:

You can not commit to making their payment. It is theirs, not yours. What you can do is like you said, option it. On the sell end do not advertize it as a L/O unless you give 50% rent credit for the high payment and include T&I. As an owner financed sale you can probably get more monthly if you let them know it is below market at $230K. All they need is 10K. If the seller is willing to pay the 2nd I would consider giving them part of the 10k. You could even subsidize the payment with the down if they will refi in a year or the payment goes up. Everything is based on no occupant no deal.

Their attorney won’t like your paper work and he would like mine less. But ask them if the attorney is going to buy it or make their dumb payment. They have already lied to you and mainly for that reason I would be super cautious.

Re: Need Help on Structuring this. - Posted by Nate

Posted by Nate on February 16, 2001 at 22:32:54:

I would be hesitant to take the house subject-to because of the very high rates on the existing financing, unless I had a good plan for paying off that financing quickly. Otherwise, the interest and resulting high monthly payments will quickly eat up all your profit.

If you were to buy the house subject-to, even if you put NOTHING down your payments would be 2400 a month PLUS taxes and insurance.

I don’t know what your exit strategy is but without refinancing the existing loans it will be difficult to make the deal work. And if your credit is good enough that you could get an 80% LTV cash out refi at a low rate, and the house did appraise for 250K, that is only $200K - not enough to pay off the second.

My insticts say pass on this one. Besides, if the seller wants $5K up front they are clearly not motivated enough to make this one work right now.