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Frank (OH)

My First Call

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Good thread, guys. Lots of real world advice and info here.

Frank, as has already been said, being nervous and uncertain means you're normal. That's always the case with a new venture. I mean, the ladies man that I am today is a far cry from the nervous n00b I was way back when. But I digress...

Worse case scenario: you completely blow the call, the conversation, the explanation, etc. Big deal! Was this one possible deal going to make or break your real estate career? Your lifestyle? Obviously not. Think of it as a great learning experience. That's right, use this woman for the experience and walk away wiser and better prepared for the next one.

One question jumps out right away: you say she wants to rent, or find a roommate. If so, is she even considering a lease option? You need to pin her down right away so as not to spin your wheels for nothing. Although, at this point, it's not a bad thing for you. Again, there's no education like experience, Frank.

Appraised when refinanced 2 years ago at $86K. Bank of America eval site says $85K for the high side.
I wouldn't put too much stock in B of A's data. That is a good starting point, but if you want to get serious data you'll need one of the legitimate online services that charge a nominal fee, or access to a Realtor with MLS data.

In your post you also said that appreciation is around four percent. Well, if the property appraised two years ago at $86K, wouldn't today's FMV be around $93K then? If her balance on the property is $84K, that gives you a $9K spread. Not earth shattering, but in the price range we're talking about, enough to work a deal...if she even wants one.

So, I suggest you follow up and pin her down. Is she interested or not?

Lots of good info and ideas in this thread. Thanks, all.

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I do have to be careful here. If after 12 months, the appraisal for the T/B'ers conventional financing needs to at least be the negotiated price of the home. If the appraisal comes in lower than what was negotiated, then no mortgage for the T/B. Correct?
This really isn't your concern.  The T/b knows what the terms are when he/she signs the agreement, and it is their risk that the home will appreciate the difference.  But, if it helps you to sleep at night, we're not talking about a $50K spread here; it's only going to be a few grand so I doubt it's going to be a problem with the lender.

 

Jeff,

Aren't we trying to help people here? I'd rather not put a T/B in this situation with a lender. What if it backfires and the lender says no. I don't feel comfortable with that.

 

MC,

I do need to get a firm grip on what it's worth before I work the numbers. She told me she wants to sell. She cannot afford it alone. I do believe I'm over analyzing, but I do agree that this is a good thread thanks to Doug and Jeff. Great info for the noob!!

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I do have to be careful here. If after 12 months, the appraisal for the T/B'ers conventional financing needs to at least be the negotiated price of the home. If the appraisal comes in lower than what was negotiated, then no mortgage for the T/B. Correct?
This really isn't your concern.  The T/b knows what the terms are when he/she signs the agreement, and it is their risk that the home will appreciate the difference.  But, if it helps you to sleep at night, we're not talking about a $50K spread here; it's only going to be a few grand so I doubt it's going to be a problem with the lender.

 

Jeff,

Aren't we trying to help people here? I rather not put a T/B in this situation with a lender. What if it backfires and the lender says no. I don't feel comfortable with that.

 

MC,

I do need to get a firm grip on what it's worth before I work the numbers. She told me she wants to sell. She cannot afford it alone. I do believe I am over analyzing, but I do agree that this is a good thread thanks to Doug and Jeff. Great info for the noob!!

 

Frank, aside from helping a homeowner move their house, you are aslo helping a t/b break out of the rent cycle and get into home ownership. As jeff and doug pointed out previously, you can use the numbers necessary and as realistic as possible to make the deal work. Even if a t/b had to come up with a few grand at closing to make the deal work it still is significantly less then a 10% down payment. No need to mislead the t/b, I am sure this can be explained all before they sign on the dotted line.

 

Of course its all moot if the t/b doesn't even exercise the option.

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1. Offer $80K. Buy the place. (Worth $85K with 4% appreciation?)

 

2. Rent with a positive cash flow of a couple hundred bucks.

 

3. Hold for 5 years. (Value is now $103.4K. You now have $23.4K equity.)

 

4. Refinance and take your equity out TAX FREE.

 

5. Buy more properties.

 

Repeat the above 5 steps with each property until you retire.

 

How many millions of dollars of real estate do you need to be sitting on at retirement? :lol:

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Jeff,

Aren't we trying to help people here? I'd rather not put a T/B in this situation with a lender. What if it backfires and the lender says no. I don't feel comfortable with that.

 

Yes, we are and I believe the seller is benefiting because she will have her mortgage payments covered and will potentially sell her home. Refer back through the thread for just a few of the benefits the T/B is getting. The fact is only about 25% of T/B's actually exercise their option to purchase for various reasons. You shouldn't feel bad if this happens. You didn't live their lives that got them to this point. Again, refer back through the thread for just a few of the many benefits the T/B is getting. You shouldn't feel uncomfortable at all.

 

Jeff

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Aren't we trying to help people here? I'd rather not put a T/B in this situation with a lender. What if it backfires and the lender says no. I don't feel comfortable with that.
If you knowingly place a t/b in a situation where they won't be able to qualify down the road, you certainly deserve any problems this may cause you later on. On the other hand, if for some reason a property doesn't appraise at the agreed to price, that is, for the most part, out of your hands, Frank. Markets change all the time. Housing prices come down. Heck, the market could even appreciate unexpectedly and you'd lose out potential back end profits. But, I think you'll find that most appraisers put the value of the property at the agreed to purchase price, unless the market has moved markedly in either direction. Don't let the little "what ifs" derail your progress. Take care of the big things, and the little things will take care of themselves. Be honest, be fair, and you'll be fine.
I do need to get a firm grip on what it's worth before I work the numbers. She told me she wants to sell. She cannot afford it alone.
If this is the case, then it behooves you to run the numbers and know with certainty the FMV, as well as what the rental rate is.

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She told me she wants to sell. She cannot afford it alone.

 

So, cook up a dish of lasagna and move in with her. :P

 

Is she cute? :lol:

 

 

 

 

 

Sorry ;) .

 

Now back to our regularly scheduled thread.................

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So, cook up a dish of lasagna and move in with her. :D

 

Is she cute? :lol:

 

 

 

 

 

Sorry ;) .

 

Now back to our regularly scheduled thread.................

 

Don't know. She sounds cute. Obviously her ex didn't think she was so cute. But that's OK with us L/O people :P

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There's an old adage someone said along the line somewhere once,

 

"No matter how gorgeous, sexy, sweet, kind, generous, loving or wonderful she seems.............there's somebody somewhere who is sick and tired of her shit..."

 

Keep that in mind always.

 

Everybody is somebody's disgarded trash.

 

 

 

COROLLARY: "ONE MAN'S TRASH IS ANOTHER MAN'S TREASURE."

 

 

Always the prophet, :closedeyes:

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If I may add to what MC just said...

 

When you do an RTO, the Buyer takes the risk that they may be--for one reason or another--unable to close and so they will lose their down payment.

On the other hand, the Seller takes the risk that the appraised may be higher than the agreed price thus losing out on potential profit. They also take the risk that the buyer may damage the property and skip town.

 

It is my opinion, that if you as a CA or SLO investor, do not compensate for the seller's risk with price and payments then you are eliminating the benefit of doing an RTO in all but the most extreme cases (i.e. where the seller would lose the house if you don't take over their payments).

 

In the grand scheme I believe buyers take much less risk in an RTO than the seller, so the price and terms should be skewed in favor of the seller.

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There's an old adage someone said along the line somewhere once,

 

"No matter how gorgeous, sexy, sweet, kind, generous, loving or wonderful she seems.............there's somebody somewhere who is sick and tired of her shit..."

 

Keep that in mind always.

 

Everybody is somebody's disgarded trash.

 

 

 

COROLLARY:  "ONE MAN'S TRASH IS ANOTHER MAN'S TREASURE."

 

 

Always the prophet, :closedeyes:

 

Sold, YOU sound like the "perfect" catch too! :P

 

Sorry, but I just couldn't resist that one! :lol:

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I'm close to 250 calls and still searching for my first.  (Hello, anyone out there???)

 

 

Are you serious?

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