what happens when a property

[mr2monster 0]

What happens when a property doesnt appreciate to the price that you have specified that the TB will buy for? If it doesnt appraise for that ammount the TB will have to come up with cash out of pocket if they still want the house correct? Either that or you will have to drop your selling price?

 

Anyone have any experience with this. I dont want to figure wrong and mark up a property X% and have it not meet the number when its time to sell.

[Kimberly 0]

What happens when a property doesnt appreciate to the price that you have specified that the TB will buy for? If it doesnt appraise for that ammount the TB will have to come up with cash out of pocket if they still want the house correct? Either that or you will have to drop your selling price?

If the house doesn't appraise at the strike price, you could lower the price, it could come out of the tenant/buyer's pocket, or the homeowner could take back a 2nd mortgage.

 

Anyone have any experience with this. I dont want to figure wrong and mark up a property X% and have it not meet the number when its time to sell.

Unless you can see into the future, there are no guarantees. It says as much in the contracts. The best you can do is mark up a property x% based on what appreciation has been in your area the past 1, 2 or 3 years.

 

Kim

[Doug Pretorius (ON) 9]

Just how strict are banks in the US? Here in Canada I've seen banks lend 95% on houses that are 15% above comparable sales.

[Kimberly 0]

Doug,

 

It would depend on the bank and if the appraiser justified the over the market price or not. You can get mortgages for more than the house is worth here.

 

I made an assumption that he was asking worse case senario. Also, I don't know the rate his market is appreciating, what he's marking the houses up, etc.

 

I'm going a little over last years appreciation. I don't think it will be a problem. Of course, lots of sellers prices are below market, meaning below recent solds, now. Many of those sellers are being transferred and almost all schools have started for the year. So the main season of traditional home buying is over.

 

Kim

[mpine 0]

Just how strict are banks in the US? Here in Canada I've seen banks lend 95% on houses that are 15% above comparable sales.

I find them to be fairly strict... even killing deals over a thousand or so in there value to the comps.

[Doug Pretorius (ON) 9]

Kimberly, the good news is that lease purchase is a whole other monster! It doesn't go by the same seasonal patterns as traditional sales, at least not around here. When everything is dead (in the winter) we can still close L/Ps inside 30 days starting from scratch--meaning no buyer's waiting list, and no referrals; just pure marketing.

 

Mike, that's crazy! Are you saying that the ONLY way for houses to appreciate is for people to pay the difference in CASH???

[mr2monster 0]

No, homes appreciate according to demand, but if your home at the time of sale is overpriced out of FMV and it doesnt appraise for that, then you either have to have someone pay out of pocket, or you have to drop your price.

 

you can be priced above FMV as long as your home will appraise for your asking price at that time.

 

Meaning, I've got to find me a very nice home appraiser. haha.

[mr2monster 0]

I guess my question was really, Do you drop your price when your homes dont appriase for the asking price or do you make your buyers pay the difference. In some cases spoiling a deal so that you can collect another option payment and start over...

[-Tony- 0]

What happens when a property doesnt appreciate to the price that you have specified that the TB will buy for? If it doesnt appraise for that ammount the TB will have to come up with cash out of pocket if they still want the house correct? Either that or you will have to drop your selling price?

mr2monster,

The way I see it you can always come down on your price but never can you go up. So, why not set the price a little higher than avg appreciation (Justin Case is my best friend)

 

Secondly is it due to the t/b not doing anything to the property to increase the value i.e t/b moves in mentions the linoleum in the kitchen isn't to good. you say yes this is why I give the rent credits and if you install new linoleum it will only help when you get the appraisal.....

 

Make sure your T/B know that this is dependent on them as well. personally if the t/b did nothing to help out I may come down 1k, on the other hand if the busted there a$$ I would have no problem coming down 5k. With there effort comes there reward

[vmoney 0]

My standard practice is to set my price to avg. appreciation for the prior 2-3 years plus a premium. As was noted above you can always go down, but you can't go up. Set your buyers expectations up front by discussing market fluctuations and that the price is being set based on conditions at that time, but there is always the chance that conditions will change. You can even remind them that there is just as much chance things will appreciate above the current level and that they will benefit from that increase. Beyond that when it comes time for the T/B to exercise the option, if it doesn't comp out you can:

 

- lower your price

- increase the term of the option ( if you think things are on the way back up)

- Let the buyer walk

- help buyer get additional financing (have seller carry 2nd for difference, etc.)

 

But the most important thing to remember is to buy right up front. Know your market and don't enter into an agreement that will put you in a position where you are counting on appreciation or the deal won't work. If you do you're asking for trouble.

 

-V

[-Tony- 0]

I never talk about the price or how I came up with that. I talk about how if the maintain or fix up the property (because it will soon be theres) they can increase the appraised value....