So many choices - which deal is best? - Posted by Ben (FL)

Posted by IB (NJ) on November 21, 2000 at 13:29:26:

In my market (extremely hot), I would not have had the chance to post this question. Someone would have thrown the cash in the seller’s face quickfast!

So many choices - which deal is best? - Posted by Ben (FL)

Posted by Ben (FL) on November 20, 2000 at 15:13:23:

A friend of a friend’s wife died a year ago, and he is now living with his father in law. He can’t stand having the house anymore and just wants to be rid of it. Here are the vitals on the house:

  • FMV = $60,000
  • First mortgage balance = $33,000 with payments of $450 at 14%.
  • The mortgage originated in 1981
  • No due on sale clause, but the mortgage also does not explicitly say it is assumable.
  • Needs around $4,000 in interior cosmetic repair.

The guy really just needs a couple thousand out of the deal.

I could negotiate a discounted payoff and get hard money loan for fix up and walking around cash, I could assume then refinance, I could wrap or lease option, etc.
There are just so many good options for this deal.

I’m leaning toward trying to get a discount on the payoff, then assuming the mortgage, refinance for 60% LTV, give seller some cash, put some cash in my pocket, and use the remaining cash to fix up, then assign me the ben. interest, then maybe keeping and renting or selling on lease option.

Does anyone have any better ideas, especially if the mortgage holder will not discount the payoff?

Re: Good 'nuff - Posted by Ed Copp (OH)

Posted by Ed Copp (OH) on November 20, 2000 at 18:13:39:


Take title to this property subject to the existing mortgage (period). Do that tonight and you should have the closing by friday. If you do not have the money see Brian’s post.

Just to clarify one point about the due on sale clause. If there is no due on sale clause, the mortgage is assumable. So do the deal and do not worry about thisw point.

The only concern that you have here is that if you do not do the deal, the next person who talks to this fellow will do the deal. If I had been the one who talked with him I would have done it on the spot.

Huh? - Posted by B.L.Renfrow

Posted by B.L.Renfrow on November 20, 2000 at 17:00:47:

Your post doesn’t make sense. You’re going to negotiate a discounted payoff, but then assume, then refinance?? If you’re going to pay it off, there’s nothing to assume. Then, youi’re talking about somebody assigning you the beneficial interest? In what?

I agree with David. Why would the mortgage company consider discounting? Sure, you can pay it off, but why would you? Hard money is probably going to run you well over 14%. Why not just take title subject to the existing loan? That’s a good enough deal, if the seller wants a couple thousand, I’d certainly give it to him.

Doing that, you’re in it for $39k ($33k mortgage balance, $2k to the seller, $4k for repairs). You instantly have $21k in equity. What’s not to like about that? You don’t have cash for repairs or to give the seller? Borrow from a credit card, find a partner, or sell at a discount to a buyer willing to do the repairs, and use part of their downpayment to pay your seller.

You’re right about there being plenty of options. Once you acquire the property, you can sell to a cash buyer, you can sell on a land contract, a PACTrust, or a lease/option, or even just rent it.

Brian (NY)

Why would… - Posted by David Krulac

Posted by David Krulac on November 20, 2000 at 16:05:34:

mortgage holder discount a seasoned, 19 year old mortgage with nearly 50% equity coverage and a 14% interest rate? I wouldn’t, would you?

On the other hand it doesn’t cost anything to ask.

The interest rate is high, which is a point for paying it off, but keeping it can save some costs and a new lender could be nearly as high. If you’re only keeping the property for a short time the high interest rate is not of large consequence.