Please help on new deal just called in!! - Posted by bvmp

Posted by bvmp on December 12, 2000 at 13:29:08:

Owners will cooperate by placing property into land trust wherein we will be the owners of the property.

Then we will “sell” to tenant who has received the rent credit. The trust will then provide the mortgage to the tenant buyer.

Then we will sell the mortgage to pay off the seller and make our money on the spread as well as the points on the mortgage.

Please help on new deal just called in!! - Posted by bvmp

Posted by bvmp on December 12, 2000 at 11:32:25:

I think I have a deal that I can get done …and help someone out in the process. But I’m not quite sure as to how to get it done…I’d like to pick your brain.

Deal Summary:

Just spoke to a couple who responded to my ad. Here is their situation-

They lease optioned a house that they have been living in for 3 years under the following terms:

Purchase Price: $156,000
they have been paying $1700 per month for 3 years

Balance on their option: $132,000 ( what they can buy the property for)

They have an appraisal in hand for $176,000.00 (ordered by a mortgage broker)

They have been dealing with this mortgage broker who has not been able to get them closed for 6 months. (they have an IRS problem on their credit report) they have great income however(husband is part owner of a local car dealership)

Here is what I am considering:

  1. I step in and buy the house for $132,000 through a land trust with the existing owner

  2. sell it to them for $176,000 with a rent credit down ( their checks verify payment) to a first mortgage of $150,000

  3. sell the new first mortgage for $144,000 @ 13% on a 30 year amortization with a 10 year balloon ($5,000 discount on note)

  4. I make a quick fee as a consultant and on the mortgage spread

What do you all think?

Please let me know

Re: Please help on new deal just called in!! - Posted by JoeS

Posted by JoeS on December 12, 2000 at 20:42:04:

The IRS lien will attach itself to the new owner. How much is the lien? Is the property really worth what the appraiser says it is? Do your homework on values. How does this sound…L/O the house from the current owner for $132,000, 3yr. minimum, $1700 monthly. Sub-lease it to the current tenant for $175,000,1yr. option, $1900 per month. After 1 year, take them to the mtg. broker, they can get a new mortgage loan for 95% or 165,000. The IRS lien can get negotiated down to 20 cents on the dollar during the year. You walk away with option money up front, $200 monthly, and $33,000 at the end of the year.

Re: Please help on new deal just called in!! - Posted by B.L.Renfrow

Posted by B.L.Renfrow on December 12, 2000 at 20:40:25:

I would want to know the seller’s story. Do they NEED cash now, or are you pursuing the idea of cashing them out now because the buyer’s plan was to get new financing? I’d want to know also if there is an underlying mortgage.

If the sellers don’t NEED the cash, or there’s little/no equity, perhaps you could take the property subject-to the existing loan, then sell to the car dealer on an unrecorded land contract. Sounds as if he wouldn’t have a problem making the payments, and he has a track record. That would allow him to enjoy the practical and tax benefits of ownership, while keeping his name out of the public record, so the IRS lien wouldn’t attach. Or maybe you could structure a PACTrust, with the same effect, where the car dealer receives a percentage of beneficial interest in the trust.

If the original seller must be cashed out, then you could structure a note between yourself and the seller, assuming the buyer would assign his option to you, and assuming you have good credit. You could then sell THAT note to obtain cash to pay off the seller. Then, you sell on a land contract to the car dealer. If his IRS problem is something which can be resolved in a few years, put a balloon in the note. If not, just let it pay out and let him figure out in 30 years how he wants to take title. Of course, it’s unlikely he’d hold it that long anyway.

Brian (NY)

Re: Please help on new deal just called in!! - Posted by Geoffrey Faivre-Malloy

Posted by Geoffrey Faivre-Malloy on December 12, 2000 at 17:41:43:

LeGrand says you can ask the IRS to remove a lien on a property that you own if you purchased it from a seller who had the lien on the property. I’ve not verified this and I don’t know exactly how you do this either.


Re: Please help on new deal just called in!! - Posted by doug,ky

Posted by doug,ky on December 12, 2000 at 17:14:58:

I believe the IRS lien would atttach to the property and have a first position ahead of your owner financing making it junior to IRS lien. Thus, any note buyers would not want to buy the note unless it was severely discounted if at all.

Though I’m a newbie myself… - Posted by vladimir_chicago

Posted by vladimir_chicago on December 12, 2000 at 12:27:20:

I do not see how step 1 could be accomplished, since your callers have the option to purchase NOT you. In order for you to purchase, they would have to assign their option to you and you would have to purchase with YOUR financing or taking over ‘subject to’ the loan of the original seller–which you would have to negotiate with the original seller (not your callers).

Step 2–are you going to claim that you’ve received their payment checks or will original seller claim receipt of those checks on his tax return forms?

Good luck and please remember this is a learning experience for me as well–hopefully there is a way to do steps 1 and 2 and some of the more experienced investors will correct me.


Re: Please help on new deal just called in!! - Posted by Mark-NC

Posted by Mark-NC on December 12, 2000 at 11:42:38:

There is a 99 percent chance you will not be able to sell that note because of the irs lien. At least that has been my experiance with note buyers.