Posted by breeves on May 08, 1999 at 11:44:54:
I have currently opened escrow with signed contracts and my earnest money is submitted to title company. I am buying a SFH and Townhome from one seller. In order to take cash out, this is how the deal is structured. This arrangement was suggested by the note buyer. My partner (friend with no real estate interest)will buy from seller at my bargained for price 105k (both properties). Partner will sell to me at appraised value of 135k. Partner will create note at 90% of FMV = 121.5k and sell at closing for 91%=110.5k. I’m putting down 10% cash=13.5k.
My partner will take (110.5k + 13.5k )123.5k, pay seller 90k, seller taking 15k second secured by a property I own outside this transaction. So seller has what she wanted-90k cash and a 15k second. Partner will rebate to me as repair credit the cash left on the table 123.5-90=33.5k. I will take 20k out of deal at closing. 33.5k - 13.5k(my dwn pymt)=20k.
I will sale on L/O and get approx.6k dwn for both properties. So bottom line I will have 26k in pocket.
I will owe (note 121.5 + 15k second) approx 101% of FMV, but since I have 26k in cash, I figure thats ok. I will sale at 140k on the L/O and make up that difference plus a few thousand.
This is my first at this type of deal. I’m working with “No Banks Required” and I’m assuming they are brokering note to JEM investments. I got in touch with “No Banks Required” through the LeGrand newsletter I get. They have been very good about walking me through this transaction. Closing about 3 wks away. We’ll see if it all pans out as noted above.
I would welcome comments on how I could have improved on this deal. I know I could have just got an option on the deal and tried to find a buyer and have the orginal seller create the first and flipped the note, but she need this done quickly to close on another house in June and this deal seemed good enough for me to take title and sell via L/O.
Also, I’m new to the note business, and am wondering how to save by going directly to note buyer. For the first time this seem fine sense they are walking me through this and I’m getting an education as well.
Thanks for your feedback.