Posted by JPiper on November 13, 1998 at 10:39:50:
I think Karp gives you good advice below. Better to question and listen to the seller (especially since he evidently knows what he?s talking about) than to try to reinvent the wheel.
One other avenue I would pursue is at the courthouse. You mention this gentleman originally had 325 acres, which he has sold off with the exception of this particular parcel. Why not do some homework?? Go to the courthouse and find out how the other parcels were sold. If he has been equally accommodating with the other buyers, you just may find a technique used that you know in advance would be acceptable to him. This may well give you plenty to discuss with this seller. I would be particularly interested in discussing the situations that MAY NOT appear in the courthouse records as having been sold. Perhaps this will open a frank discussion with the seller which leads to an obvious method for purchasing.
Frankly, one of the components to structuring a deal is the exit strategy. In your case, you have no effective exit strategy. There?s a big difference between structuring a deal that could be mutually beneficial to both of you, and structuring a deal that enables you to acquire the property, build a house, and live on it. The latter requires that you actually be able to afford it, and it will also later require a loan to build with. This requirement will mean that you will need to be the owner, and that the seller will need to subordinate his financing to the bank, since the bank will have no desire to be in second position. Your assessment of your own situation needs to precede any solution to this situation. I notice that in one breath you say you can afford a $50K downpayment and a $50K loan (payment here might be under $400 over 20 years. But there is no plan as to how to build the house. In another breath you mention buying the house with $20K down and paying a $180K mortgage at 4% over 20 years. This is a payment of $1090 per month?.a big difference from $400. Again no plan as to how to build the house.
Then there is the question of whether this is a deal at all. What I?m hearing is that you want to live here, and that you?re not evaluating it as a deal at all. Perhaps I?m wrong. I?ve been in the position many times of evaluating properties that I had no desire to live in, or couldn?t afford even if I wanted to. The exit strategy with these types of deals is that you need to resell in some manner at a higher price, or in a manner where your own underlying payment is covered. Living in a property is vastly different than investing in a property.
I?d love to come up with a magic bullet for you, but based on the information you have provided I would have no way to do so. Again, I would take a look at the courthouse to see what magic bullets he may have accepted in the past.