yesterday’s deal - Posted by Anne_ND
Posted by Anne_ND on January 07, 2003 at 10:54:30:
Just thought I’d post this, as after many months it has a happy ending for us.
20 months ago we bought a contract for deed on a little house. The CfD was worth about $18K with an interest rate of 7.75%, about 80 payments of $382 remaining. The house was in rough shape, and was worth about $25K, but the payor had made timely payments for 5+ years. We bought the CfD for about $14K, giving us a yield of about 20%, which at the time we were very happy about.
Within a few months the payor began struggling financially. We nursed him along (accepted late payments) for 14 months and then he left town in August, with a LOT of creditors snapping at his heels. We had no idea where he was or what was up. I had reason to suspect he had winterized the house, but we didn’t know. We attempted to find him to offer him some money to quit claim it to us, but no luck. We paid an attorney $1000 to begin the process of foreclosure, which is very long here- up to a year to regain possession and another year for the payor to come up with the funds if they wanted to buy it back.
Last week the payor called me out of the blue, told me he was working at a bible camp, and asked what we could do about the house. This payor is one of the few people we have met who has a real antipathy towards women, so I had my partner call him back. They did the guy-talk thing and the payor agreed to drive into town, give him the keys, sign the quit claim deed in exchange for $1000.
Currently our basis in the property is about $14K (includes money to payor, legal fees, back taxes owed, insurance), and it looks like it needs about $6K to make it habitable (he had winterized the house, but somehow water got in anyway and cracked the toilet bowl). The nice thing is, it would easily rent for $500/month, and we just found out last night that it includes the lot next door, which is buildable. Had forgotten that because before all we were concerned about was the cash flow from the contract. We’re buying up buildable lots in this part of town, so this is a nice bonus.
The best part is that the payor was extremely grateful to not have a foreclosure on his record, and kept thanking my partner over and over again (we agreed I shouldn’t be present). I’m glad this worked out well for him as well as for us, and I’m not missing the anxiety that the uncertainty about this property was causing me.
A lesson I learned from this deal: no matter how reliable a payor has been in the past, stuff happens, and they may not pay forever. We are taking steps to be in a stronger position financially should we have a few months of multiple vacancies, large repairs or should people stop paying on notes.
good luck,
Anne