Very Motivated Seller - No Equity - Posted by NT

Posted by MATT on March 29, 2002 at 20:33:06:

Mike what are the steps to getting the Deed? Contracts ,Paperwork?

----Thanks Matt

Very Motivated Seller - No Equity - Posted by NT

Posted by NT on March 29, 2002 at 10:41:19:

We have a very motivated seller on our hands. He has to report to his new position on Monday, April 1 in a town three hours away. His wife is staying behind with their daughter until the house is handled. Here is the rundown:
House built in '93 - in great shape, clean, new paint, etc.
new carpet, new ceramic tile in kitchen, hardwood floors
1600 sq feet; 3/2.5; 3/4 acre
Paid $139,000 June 2001
Owes $136,740
30 year 3/1 ARM @ 5.75% with up to 2% annual adjustment
ARM next adjusts in November 2002
Highest Rate can go is 10.75
Monthly payment (PITI + HOA) = $957
Seller would have to come out of pocket at least $6000 if sells with an agent (seller said this himself)
House could rent for $1100 in this area on an L/O

So, what’s the best way to move forward with these low equity, ARM deals?

  • A ‘subject to’ with the L/O to the tenant buyer on an adjustable annual rent rate?
  • An L/O to the seller with the monthly payment set and he picks up the overage when it adjusts?

Thank you in advance for any help anyone could provide.

Re: Very Motivated Seller - No Equity - Posted by Bashir

Posted by Bashir on March 30, 2002 at 10:53:11:

The question is “how much back up cashflow do you have in place to debt service the property?” If your back up cashflow is low, then I definitely would not be trying to get the deed to that sellers house, or lease option it(unless you’re assigning the lease option).

If you run into a problem getting someone in that house, or have a problem with the person you get and get behind on that sellers payment and end up with the house in foreclosure(sub2 standpt) then it won’t be pretty! IF you have back up cash flow, then you can do a lease opt. or a subject to deal. The seller(my guess) probably won’t let you take the house sub2 b/c he’s probably got decent credit, but I’m sure he’ll probably take a lease option for the mortgage balance. Do a 30 year lease option. If he won’t do 30 years, ask him how long would he do it for, and also explain to him that you need a long term lease option in order to build some equity in the place. In the mean time, you will make his payment until that pt. IF you can get a very long lease option, it’s pretty much the same as you getting the deed anyway except from a title ownership and tax stand pt. If he won’t do that, then walk! NO DEAL!

Re: Very Motivated Seller - No Equity - Posted by Mike

Posted by Mike on March 29, 2002 at 11:58:08:

I recoomend doing the L/O and getting the seller pic up the difference. Although once you start your power to continue to collect it lessens and lessens. If it were me I would get the deed. get a commitment of a couple hundred dollars each month. then lease option the property and try to build in additional cash flow on top of that, and accelerate the mortgage.