Posted by JT - IN on May 15, 2001 at 06:36:02:
Taking a house in trade, is simpler than you might think. We have all been a party to a trade scenario, in the vehicular scense. It really is not much different.
There are several elements to making it work. The buyer must have enough equity in their house, (unless I am relly motivated to sell other property), and a re-saleable property. They must also be interested in buying another property that I have for sale. After establishing that they are a buyer for the house that I am selling, and we have agreed upon a price that I can live with, then I make an appt to view their property; (now I already have an idea what their home is worth). I attempt to give them exactly what they are asking for their house, less expenses. Expenses will be exactly what I need them to be, to make the deal work. eg.
Purch price: 79,900
Mtg payoff 51,500
RE Comm. 4,800 6% of my selling price
Repairs 500 Not all that relavent
Carry costs 2,100 cost to own, per mo. x 3
Total Exp. 7,400
Less Mtg. amt 51,500
Total Deduct 58,900
Net Equity 21,000
Less incidentals selling expenses like transfer tax, tax proration, etc.
This buyer will have a 21,000 credit at closing, toward the downpayment of new house, and at closing, I will either take their house subject-to, and resume their obligation on property, until sold, or sometimes the mtg loan must be paid off.
This purchase is not designed for me to make money on their proerty, but to facilitate their ability, (liquidity), in buying something else that I want to sell’ and am usually making pretty good amt of $$$$$ on. That is my motivation in this deal.
However, you could sharpen the pencil and have all types of creativity, with this transaction. You could reduce the price on their house, increasing profitablility on that transaction, supposing you had someone interesting in downsizing in property. You could become a facilitator in taking a house (or other property; boat, coin collection, etc. but NO children, which I have had offered), in on trade, and find them another house that you could buy creatively, on L/O or subject-to, that they would be the end user and ultimate owner of.
There are endless possiblities, once you get the ball rolling, because RE is nothing more than a BIG CHECKERS game. If you can always see your next move, the game can be real fun to play. Think about the “next move” when it is time to work out the details. Enough (too much) said here.
Just the way that I view things…
JT - IN