Option... - Posted by Pavon Bailey

Posted by Pavon Bailey on November 19, 2000 at 21:17:59:


Option… - Posted by Pavon Bailey

Posted by Pavon Bailey on November 18, 2000 at 18:26:02:

Good evening, investors!

First off, my apologies for not being here. It was crunch time at school these past few weeks, and I had papers and presentations coming out the wazoo!

Anyway, I’ve been reading the real estate pullout of the paper every Saturday between homework and my J.O.B. (just the advertisememts). I noticed this one house on the market in a nice area of town with 6 bedrooms and 4.5 baths. Well, the seller listed it for “his” appraisal value: $570K.

No responses.

Next time I looked, he reduced the price to $495K, a big drop, if you ask me. Still no responses.

4 weeks ago, he dropped it some more for $469K. Another NesTea plunge with no responses.

2 weeks ago, he dropped the price even further to $449K. He is offering owner financing and he added these two words: MUST SELL.

Today in the paper, he has the house listed for $439K. This guy is constantly dropping the price on the house.

OK, I haven’t called him yet. I will call him tomorrow, but before I do, I need the opinions of the pros on this outline I’m about to present to you. Here it is (remember, this is a general outline):

I was going to find out about the house, obviously. Well, apparently, he is having difficulty marketing this house. So I proposed an offer to him, as per Ron LeGrand. I was going to offer to market the house for him, at my expense and time, in exchange for an option to buy the house.

I was then going to sell the house on a wraparound for the cash flow to cover his mortgage payments per month. I was going to sell it for $540K with 10% down (verifying appraisal, of course), remaining balance payable over 30 years at 10% interest with a 10 year balloon.

If he mananges to sell the house before me, I will put in writing that he can buy my option for $6000. Of course, I will record the option.

Does this sound like a solid plan? If not, please point out the flaws. I appreciate the constructive criticisms from all the experienced investors on here.

Have a great evening and enjoy the rest of your weekend. Down here in Louisiana, it’s all wet and cold from harsh rain, so my weekend will not be a happy one.

Warmest regards,

Pavon Bailey

Make a commitment! - Posted by Potash

Posted by Potash on November 18, 2000 at 21:44:49:


Of course knowing what the house is worth is a good idea. But your lack of commitment fatally flaws your entire investment carrer. What are you doing spending time in school? Make a commitment! Quit school! Make a commitment!

A Few Questions. - Posted by Jim Kennedy - Houston, TX

Posted by Jim Kennedy - Houston, TX on November 18, 2000 at 19:22:06:


Before I’d even attempt to formulate an offer and an exit strategy, I’d want to know the answers to the following questions:

  1. What is the house worth? . . . not what the seller is asking, not what “his” appraisal value is, not what ANY appraisal says it’s worth, BUT what does the MARKET say it’s worth?

  2. Why is the seller selling? . . . MOTIVATION!

  3. When does he need to sell? . . . URGENCY!

  4. What’s the balance, interest rate, remaining term, etc. of the existing financing? Is he current with the payments on his loan(s)?

  5. What’s the condition of the property? Does it need any repairs, and if so, how much will they cost?

  6. Why hasn’t the property sold thus far? OR more importantly, what will you do differently to sell the house? You say that he’s already offering owner financing and he’s dropped his asking price from $570K to $495K then to $469K then further to $449K and now is down to $439K. And yet he’s had no responses to his ads. I’m confused, if you haven’t called him yet, how do you know that he’s had no responses to his ads? Are you assuming? What terms is he offering for his owner financing? If he couldn’t sell it for $439K with owner financing, what makes you believe you’ll be able to sell it for $540K with owner financing? What will you do differently to get a buyer?

  7. What does the seller need (not want)?

Find out the answer to these questions and we’ll be better able to advise you.

Hope this helps.

Best of Success!!

Jim Kennedy,
Houston, TX