We (my partner and I) just finished a rehab (basically a great update job) on a house is a so-so area. It is very close to a huge country club/golf course that the PGA just announced would be the home to one of their major tournaments for many years to come. Here are the numbers:
Purchase Price (with CC rolled in ): $101,500
Total rehab amount: $19,000
Total invested: $120,500
House is on the market for $154,900
I have it listed with the agent who brought me the deal. We agreed to have him list and try to sell it for a 90 day period, after which I would then handle the selling, lease purchasing or renting of the property myself.
$154,000 is a fair price for the up and coming area. A year from now it (the area) will be even better. We could probably get 140k-145k in a hurry if we dropped the price.
We have about 60 days left on the listing agreement are not getting hardly any showings or traffic on the property, so I am starting to plan my contingency. Here are the options we are considering:
Lease Purchase with 5% down.
Sell without agent and probably attempt to carry a second for 10% and a slightly higher interest rate…in an attempt to get someone with challenged credit qualified. Dropping the agent’s 6% will almost cover the the amount of the second note we would be carrying, so we are still where we want to be (profit wise) if the buyer ever defaults on the second.
Use as rental - which we really don’t want to do, because we want to use the profit for other investments. I suppose perhaps we could do a cash out non-seasoning refi and then rent out as well.
Sell the property for $165k (if the market can hold it) with 5% down and the remaining balanced completely owner financed at 7% interest rate. Sell the note at closing for $0.90 on the dollar giving you $141,075. In total you walk away with $149,325.00. Someone offered me this program to make my buyers more eager since there are no points, they havae someone that they use regularly that will purchase these notes at closing so everything is done that day. To set up this method takes 3 weeks, so that means you can close within three weeks of getting a buyer. You should also give an open listing and list with every broker individually so if any of them find a buyer they don’t have to split the commision between the listing office and the selling office. ( just an idea) Definitely list with an office in that area they may have more clients that want that area.
I like this one:
“2. Sell without agent and probably attempt to carry a second for 10% and a slightly higher interest rate…in an attempt to get someone with challenged credit qualified. Dropping the agent’s 6% will almost cover the the amount of the second note we would be carrying, so we are still where we want to be (profit wise) if the buyer ever defaults on the second.”
However, I’d make some changes.
Instead of cancelling the listing, why not use it to get the word out more?
You have some room in the deal as indicated to carry a second, so this is possible.
Also, what about contacting some local mortgage brokers who deal with B/C lenders…those who lend to buyers with lower scores.
See if they have programs that can lend 100% of the purchase price, even if it means two loans (80%/20%), or programs that allow seller concessions, rebates at close, or seller carried seconds.
When you find one, get them to run credit on potential buyers to see if they will be able to fund the deal.
Only AFTER they qualify, show them the house, or move things ahead with a contract.
Then, add to the listing agreement, or MLS remarks, “Possible 100% Financing Available”.
I’ve done this a lot recently, and it seems to work well.
One other thing, make sure with the mortgage broker that any lenders they send the potential buyers thru DO NOT have title seasoning requirements, since I’m assuming you’ve only owned the rehab for a little while.
IF you have owned for more than 90 days, you should be okay with title seasoning issues though.
Anyway, just my two cents, keep the change,