I was recently contacted by an lease/option tenant wanting to sell his option. The purchase agreement was $82k, he put down $13k at signing which leaves a balance of $69k. He also upgraded house and showed me an appraisal of $95k. Came on hard times and needed out quickly. I bought his option for $2k, which puts me in the property for $71k if I choose to actually buy it. I have until June of '08. Payments to the owner are only $450/mth and market would allow for $800/mth rent.
I don’t really want another rental, don’t really want to have to close on house. Offered next door neighbor the option for $25k which would’ve put them in for the appraised $95. After a few days they decided against it.
What would the guru’s on this board do/suggest??
Would really like to sell option and move on…
Thanks in advance…
Split the difference and move it fast. It’s a buyer’s market out there, take your easy profit and run. If you’ve got $71k in and the appraisal is $95k put it up in the paper for $83k. Here’s what I would do, hold an open house on a Sat or Sun. Make the timeframe for the OH short so as many buyers as you can get are in the house at the same time. This will create pressure on them to sign fast or offer high. Run an ad like this in the paper for the whole weekend:
MUST SELL THIS WEEKEND!
Appraised at $95k, Selling for $83k.
$12k instant equity! Recently remodeled.
Bring your checkbook, $3k deposit due on signing.
123 Main St Townname Open House Sun 11-1
Call 888-888-8888 for details
You’ve got $2k in and will likely have to pay a few months in rent before it closes, the $3k puts all of that back in your pocket. You’re $71k into this total including your option and the purchase price, you can put it on for $83k and still have $7k +/- to negotiate. Even if you only make $5k total profit how much effort did you put in? Less risk than rehabbing something so as far as I’m concerned you can afford to take a smaller, quicker profit on this one.
Oh and I should add if you have more deals coming down the pipe it won’t hurt to have your phone number in there as you may get follow up calls days/weeks later with people asking if its still available. If that’s the case you can say “No I’m sorry that’s sold but I do have a few others.” Normally many folks would say don’t put in the phone number, just let them all show up on Sunday, but if you have more deals coming this can be a little bonus.
Outstanding reply, Rich. Much appreciated!
Anyone disagree or have other opinions?
Thanks again…
In doing your proposal, Rich, how would closing actually play out since I’m not an owner and just hold the option? This was another concern I had and forgot to mention.
Thanks again…
Here’s some reading for you, Petemfa does a ton of options: http://www.reiclub.com/forums/index.php/topic,30108.msg140333.html#msg140333
He usually has his buyers go to his attorney’s office to sign the P&S agreement with the higher price filled in. He negotiates the higher price and calls his attorney before they go down there to tell them the price to fill in. Then his attorney handles closing it.