A homeowner contacted me from my bankruptcy mailer with a home he would like to sell. Here are the details I gathered over the phone.
Bought in 2002 for 125k. Refinanced in 2004 for 135k. Now owe 142k with payments of $990 per month. He seems to think the place is worth 162k, but according to the closed sales on the MLS for the past 6 months its only worth 135k-145k tops. I do not get the feeling the Homeowner is very motivated but you never know. A job loss caused him to go into bankruptcy, he is working now but at a salary insufficient to continue to make his payments. My question, is there any way to make a profitable deal here? If I can not help(buy at my price), what should I advise him to do? Thanks
It’s not your job to advise him what to do. He has a bankruptcy attorney for that. Of course he doesn’t seem very motivated – he’s in bankruptcy and that can be depressing. You’re a businessman with a goal – to buy his house. You know what your bottom line is in order to make this work. Make a fair offer. He’ll either accept it or reject it. Good luck.
Very true Gary. I’ve got to adopt that attitutde and keep foucused on MY goals. I’ve found myself spending to much time on the phone with these homeowners listening to all of their problems and not enough time discussing business.
Regarding my original post, if he really is paying 990 per month on 142k would this be a good option for a sub2 acquisition? The home is only worth about what he owes and he is 3k behind. The home is very good shape according to the H.O. Similar sized homes rent for 1400-1600.
Just to show you how motivated he is, he broke our appointment for yesterday and said “lets try for next Saturday”.
Hi Gary,
I bought a house last week for $246K. It should resell for $265K or so. My real estate group told me last night that I will lose money on this house. I thought a 20K spread was good! My realtor friend will sell it for me on MLS for 1/2%, so my top realtor fees would be 3 1/2% plus closing costs.
WHAT do you think? I can’t keep it and rent it out because the rents here are not high enough to cover the payment.
THANKS FOR THE ADVICE,
A.
I would like to assume his mortgage if it is really 990 per month and then lease with option to buy to someone else. Rents for homes in the area are 1400-1600. I am concearned that the resale value of this home will not be very good though, considering he owes 142k(139k-loan + 3k+arrears) and thats about the value of the home now. Gary, I like your advice of using land trust for these type of deals but I am open to all suggestions. Right now I do not feel their is much profit here in the back end but $400-600 per month positive cashflow aint so bad.
What type of deal would be best for everybody?
You don’t have a 20K spread. As soon as you take out costs, commission, payments while it is on the market, etc., you have nothing. You should not have bought the house without clearly knowing what you were going to do with it, and without running the numbers, including all costs.