Stop me from being stupid!/What would you do? - Posted by Miguel (N CA)

Posted by Brian Powers(MI) on April 17, 2003 at 17:16:16:

got it…misread your post…i thought the $260K was total.

Stop me from being stupid!/What would you do? - Posted by Miguel (N CA)

Posted by Miguel (N CA) on April 17, 2003 at 14:56:47:

Hi, everyone.

Got a call from a guy with the following situation:

4200 Sq. Ft.
Luxury throughout, desirable area.
5+ usable acres
Owes 542K
$2300/mo (low rate/int. only loan)
Comps are between $800K & $1.1 Mil.
Wants a total of $260k of which $30k-$40k needs to be up-front.

Has had it on market for over a year with “a lot of interest” but few offers.
One offer was too low for him (800k) and the others needed to sell their homes
first, and he didn’t want to wait. If he waited long enough I think he would get his $890k asking price.

But now he just wants to be done with the thing-
divorce and loss of job situation.

The high-end homes can be trouble (as i’ve heard on this board at times) but that low monthly payment got me interested. And swinging that up-front money wouldn’t be a problem.

What do you guys and gals see here? I see $100k potential…or a big loss.

Would you buy it on an S-2 or a L/O? (he’s open to both and willing to take principle-only payments on a note).
Would you sell it on a wrap or L/O? (I know in general this would bring in more interest, but does that still apply to higher-end homes?
Would you do some sort of equity/profit sharing agreement, thus protecting your interest?
Would you walk away?

Anyway, thanks in advance for all your input.


Don’t get too excited about the payments - Posted by rm

Posted by rm on April 18, 2003 at 12:52:51:

High-end homes often rent for significantly less than the payment on a conventional loan.

“What does it weigh?” - Posted by JoeKaiser

Posted by JoeKaiser on April 17, 2003 at 20:40:17:

That’s what my buddy Cam would say to me whenever someone
wanted to sell our little auto repair shop a car. It was his way of
telling me that for me to make the best deal possible, I need to
start at where the car shredders start and value the car

What does it weigh? You know, like in terms of scrap metal.

Same diff in the real estate biz. Cam, who to this day will tell you
he was the one who first taught me which ads to circle, would be
figuring out a way to make it clear to me and the seller that my
starting point begins about where the car shredder’s did. The
question, then, becomes:

“What will it rent for?”

Five little words that for expensive homes, work wonders.

Turns out the expensive homes often rent for half of what a
mortgage payment would be with a conventional purchase.
Whenever someone with an expensive home has equity and a
problem, take him to the shredder and work it as a rental.

I’m guessing you pick this up by renting it long term, and you give
him the $800k he’s stuck at, but you give it to him 5, 7 or even
ten years from now.

I maintain if property done, you could then turn around and “sell”
it to the next fellow on terms reflective of conventional
purchasing terms and net a not insignificant spread.

So, how much does it weigh, er, ugh, rent for?


Re: Stop me from being stupid!/What would you do? - Posted by Kristine-CA

Posted by Kristine-CA on April 17, 2003 at 19:49:39:

Miguel: To me, it sounds like you have someone who has ideas about what the property is worth and is holding out. His perogative, of course.

If it were me, I’d offer him less. A lot less. For there to be a deal for you, you need to get it for less. Offer to take over the existing financing, give him something down and have him carry back the rest.

But what’s your exit here? Can you get a montly payment from a tenant or t/b that will cover the debt service of both payments, etc.?

Sincerely, Kristine

Re: Stop me from being stupid!/What would you do? - Posted by Brian Powers(MI)

Posted by Brian Powers(MI) on April 17, 2003 at 16:23:30:

somewhere between $800K and $1.1 million? you dont have comps, you have a SWAG.
secong, i fing it hard to believe this home is worth anywhere near $800K, the seller is willing to walk for $260K, and the house is still no the market.


Re: Stop me from being stupid!/What would you do? - Posted by Heather -Tx

Posted by Heather -Tx on April 17, 2003 at 15:57:16:

I would walk away myself, for several reasons. On a house that size, 100K really isn’t all that much for that much risk IMHO. Repairs would be costly, holding would kill most of us, and they are harder to move. Of course I am still a newbie and I know I don’t have the knowledge for a home this size so maybe I’m not the best to answer this question.

If something wrong DID Happen though, what would it do to you to lose 40-50K (your down-money) Could you eat that if say holding costs got out of hand ? Or if there was a bust in the pipes and you had water damage and repairs and so on… 40-50K would kick me in the fanny and take my firstborn child to boot! LOL

Like I said though, not having too much experience yet, maybe others will disagree.

On the interest only payments… there is a big balloon payment I assume ? When would that be if I assume correctly (Which rarely happens =P )
Just some things I thought about while reading your post… hope this helps.


good post (nt) - Posted by Joe C. (AR)

Posted by Joe C. (AR) on April 17, 2003 at 23:30:00:


Re: Stop me from being stupid!/What would you do? - Posted by Miguel (N CA)

Posted by Miguel (N CA) on April 17, 2003 at 16:47:36:

Brian, thanks for the reply.

What a SWAG?

I have access to the MLS and there are similar props (same sq ft, lot size, etc.) that have sold for more (some less)in the area.

Remember, he has a first on the place for about $542k, so he want’s $260k on top of that.


Re: Stop me from being stupid!/What would you do? - Posted by Nate(DC)

Posted by Nate(DC) on April 17, 2003 at 18:42:17:

I think it stands for “Some Wild-A$$ Guess”

And that is correct.

Besides, look at it this way, if he wants $260K on top of $542K that totals $802K - if it’s worth $800K you paid full market price!