Possible 1st deal - Posted by Frazcol

Posted by Randall Porter on July 11, 2001 at 16:07:31:

The only way you can buy this house for $15,000 is if the seller is willing to write a check at closing for approximately $17, 000 to pay off the balance of the mortgage. I seriously doubt the seller would be willing to do that, even if he had the funds avaliable to do it.

However, this still may be a good deal, depending on the value of the property after it is repaired. What will it be worth? It sounds like the seller would be willing to deed you the house with zero cash out of your pocket. If the value is there, this may very will be a good deal.

Possible 1st deal - Posted by Frazcol

Posted by Frazcol on July 11, 2001 at 15:16:02:

Help, I have a very motivated seller who wants to sell a 2/1 house. Property is in need of about 5,000 in repairs. I have a contract on the property and am waiting for the title search to come back. In further talking to the seller I just found out that he is carrying a mortgage on this house. According to him he bought the house 12 years ago, in 1988, at $37,370. I asked him to find out from his mortgage company what the balance is. He called today and said the mortgage company could not divulge that information over the phone, but would mail it to him. He estimates that the balance is around 32,000. In my initial conversation with seller, he is willing to sell house for 15,000 because he wants to get it off his hands, his intentions were to fix up but he never did. My question is: (1) How can he sell for 15,000 and still owe mortgage company 32,000 (2) by me having a contract on property, I do have a subject to clause, how in the world can I make this deal work. I want to purchase from him and flip it. But it doesn’t seem like this is going to work to my advantage. At this point, I’m not sure how I should proceed with this. Initially I was very excited when he was willing to take only 15,000, but now I’m not so sure. Please help, any suggestions will be appreciated.

Thanks to all

Re: What does the contract say? - Posted by Ed Copp (OH)

Posted by Ed Copp (OH) on July 11, 2001 at 21:07:33:

You have given us no information that could possibly result in any of us being able to give you an answer.

None of us can tell what the question is, and quite frankly I get the idea that you are not sure either.

Now if you do not understand, it is not time to get into a contract situation yet.

You say that the seller is “carrying” a mortgage, when your explanation indicates that the mortgage company is “carrying” the mortgage and the seller is obligated to pay it…BIG DIFFERENCE.

You indicate that you have a “subject to” clause in your contract, and then you indicate that you do not understand what that means. THIS IS A PROBLEM.

If you buy from the seller as you have indicated here you are talking about $15,000 cash to the seller, subject to the existing loan of about $32,000. for a total price of about $47,000 You will be the one to get to make the payments after the closing.

Now you are willing to “flip” this deal to an investor who is going to give you $15,000 cash and whatever added amount that represents a profit for the house. The new investor will have to then start making the payments on the underlying loan of about $32,000, and do the $5,000 in repairs. Then the investor who now has over $20,000 in cash, plus whatever profit that he gave you, and has been making payments all along; will be ready to find a buyer for this property.

Retail for this property is going to have to be up around $60,000 for it to even begin to work. Can that be done? Did you understand that was what was needed? If not keep reading, and keep your cash in your pocket.