Posted by JohnBoy on July 17, 2001 at 08:22:12:
If the true market value is around $250k then I would agree with what you’re saying. I would however question the appraisal of $289k from two years ago. If the true value is really around $250k then it would be hard to comprehend that some appraiser would have bumped up the value by $40k for the second mortgage holder to justify giving the loan. I see the appraiser pushing it by $5k or so, but not by $40k.
I guess what we need to know is how much did Rita pay for the house when she purchased it, how long ago was that, and what have comparable homes in the area sold for recently. That would give us a more realistic idea of what the value would be on this home.
As she stated, she started out with an asking price of $289k and it hasn’t sold. It’s been on the market for a while now and we all know the longer a home sits on the market the more potential buyers tend think something must be wrong with it. It could also depend on how the home has been marketed. Did any of the realtors market the home other than just sticking it in the MLS and just wait for someone to see it? Have many people been by to look at the home? What are other homes in the area for sale priced at? What condition is this home in? Does it need any work? Carpet? Paint? Etc.?
There could be a number of reasons and/or a combination of things as to why this hasn’t sold.
Even if she had to sell for $280k she could still get the $10k down, bring the loan current, pocket about $5k and pick up $200+ per month cash flow. Her back end would be less. So it would appear she still has room to play with this.
I can’t figure out her numbers on that second though. Those payments are high even for 11%. I’m wondering if the second includes the taxes and insurance or not? It appears that they aren’t included on the first based on her interest rate and payment amount. The second would come out to an 11 year loan based on $950 payments at 11%.
So depending on how long her second is for and how long she has paid on both loans it would depend on just how much back end she could make off this selling with owner financing at 10% - 11% amortized over 30 years with a one or two year call. Her second would be paying down on principle much faster than the note she would carry and she would have a nice spread between the rate on her first, so she could still end up with something decent on the back end here. I will need more accurate information on her loans and what the true market value is to determine anything to be in the ballpark as to what she could realisticly get out of this.