Would this work? - Posted by Bart (FL)

Posted by Bart (FL) on November 16, 1998 at 16:51:57:

Thanks John & Bud for the feedback. I had a feeling
that the air was a little different when you get up there in price.


Would this work? - Posted by Bart (FL)

Posted by Bart (FL) on November 15, 1998 at 13:35:51:

There is a riverfront home that has been on the market for over a year. The original list price was $475,000. and it has been reduced to $400,000 over the year.
The main reason it has not sold is because the interior is dated. This property is being sold for an estate. The attorneys have it listed with a local Broker. The listing is about to expire and I want to submit a proposal.

1-(My wife is a Broker) List property for $419,000.

2-Market the property offering owner financing with 5-10% down.

3-At the time of sale create two mortgages. A second for the Brokers 6% commission and a first for the balance. Both notes would be for approx 9%, 30 year amort., 7 year balloon.

4-Sell first Mortgage and heirs get paid off.

Do you think this is a feasible deal. I know the property would appraise because I have appraised riverfront homes in the subjects market area.

Do buyers of this type of property look for owner financing and will they be turned off by the balloon?

Is Metropolitan the main buyer of simultaneous closings or are there others? What type range of discount for the First
mortgage would be expected?

Any feedback would be appreciated.

Thanks again.

Bart (FL)

Seller Financing not applicable - Posted by John Behle

Posted by John Behle on November 16, 1998 at 13:25:24:

In that price range, someone usually can afford the home or they can’t. Many pay cash. I doubt seller financing will be much of a draw for this property. If you did find someone that was attracted by the seller financing, they would likely either be unable to afford the home or possibly a scam artist

If you found a buyer and qualified them, you would be running some high LTV ratios as Bud mentioned. An option would be to create a first in the 60-70% range and a second for the commission. The estate could hold a third for the balance. It’s not likely this would fly with the estate and heirs anyway.

A buyer that could afford this home doesn’t need seller financing. There may be the rare one that has the income, but still had their credit messed up. Most buyers of that size and price range of home don’t want to mess around with Rehab. It would be a deal for someone if there were greater margins, but this home is priced at full market if you take the rehab into account. The market has already said that in the fact that it has not sold. It may not sell unless the price is lowered quite a bit or someone does the rehab. There probably is not enough profit to justify rehab for anyone other than a potential owner.

Some of the numbers, strategies and techniques change when you start going up in price. Agressive marketing and reasonable pricing is the solution for this property.

Most of the time the estate needs cash and they are not real open to seller financing. On a large estate like this, there might have been other assets.

A possibility that might work - along with a lower price - would be a trade (hypothecation) of existing paper. If your margins are large enough there, then you could end up getting this property in the $300k range which might make it attractive. The estate would have to be flexible and not need much cash. Sometimes cash flow solves the problems of the heirs as well or better than cash though.

Re: Would this work? - Posted by Bud Branstetter

Posted by Bud Branstetter on November 16, 1998 at 11:21:47:

See my comments on the post below. Because of the 80% factor the heirs are not likely to get the cash they want.