Posted by Doug Pretorius on September 25, 2003 at 09:14:40:
I’d tell this seller that I’d like to see pigs fly, too.
This absolutely should NOT be a lease option! Subject to all the way, and the mortgage will be paid off when your buyer refi’s, maybe in a year, maybe not.
Personally there’s no way in hell I would rent the house back to the seller. He can forget his $5k, offer him $1k move money. And find out what’s up with that $5k lien, what was that used for? If it wasn’t used to improve the house then tell him to take it with him!
I’m confused about something … if the house is worth $115k, and he owns about $88k (1st, lien, back payments, fees) and it needs $4k of work, how do you figure it’s got $35k of equity? By my calculations that’s $23k tops, assuming your repair and value estimates are right.
So, to think about this clearly for a moment, you’re talking about paying at least $10k in cash to get $24k in equity (which may or may not be there).
Now let’s compare to how this deal should go down: You buy sub2 for $85k (assuming you can’t get him to take that $5k lien with him), you pay say $2,500 to bring current (I’m guessing at $1k for fees, call the bank to find out) plus $1k at most to help the seller move.
Then you put an ad in the paper that says something like this: “Owner finance! No qualifying! Trade sweat for equity! Beautiful 3/1.5 just needs paint and carpet.”
Offer your buyer either a lower price or less down if they fix it up before they move in.