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jcjohnson7

CA or Consulting

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Ok, so I am set to send a Short Offer to a seller for a CA but he owes about $13,000 more than it's worth. Here are the details:

 

Seller owes $153,000

He has it FSBO @ $149,000

Seller payments = $1,290/month

After running comps, fair market value came to $138,000

County assessor has it appraised for $140,000----Not lookin' good for the seller...

 

I originally had the offer structured like this:

 

Offer to seller: $140,000

$1,300/month for 24 months (a little high but the house is really big for the area with pool, huge deck, etc.)

25% rent credit totaling $7,800 after 24 months

$4000 option consideration

Total $151,800

 

Now, he is motivated because he is in the Air Force and is being stationed in FL in 30 days. There is a good chance they will accept this offer. Do you guys ever do CAs where the seller is upside down like this in terms of equity or do you think doing a consulting job would make more sense in that he could get a little more for his house? I just don't know if maybe I should put it on the market for that price and see what response we get or if going straight to a consulting agreement would the proper move. What have you guys done with upside down deals like this? (There are a bunch out there :ninja: ) I just want to make the best use of my time and his. He told me he had thought about doing a lease purchase but he doesn't really know where to start.

 

Josh

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JC, you can do a CA with this property if you want, but I think it would be a must to tell any prospective t/b about the homeowner's mortgage situation. That is, that he owes more than the property is worth. If the deal were to continue, I would want to cover my butt by putting something is writing to that effect. Full disclosure, in other words.

The other concern is whether or not the market will accept those numbers. But that will play out soon enough once you begin marketing it.

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How would this come back at me? I haven't attempted a deal with numbers like this so...

 

From you setting up a deal whereby a seller owed more on his property than

what it is worth. When it comes time for the T/B to get financing, someone is going

to have to cough up some cash...more than likely, your seller. If he can afford it

and is willing, then proceed with caution.

 

By setting up a CA, inform this seller that he is getting debt relief today and that he's

more than likely going to have to come to closing (@ the exercising of the option) to cover

the difference.

 

You stated that he's having to transfer anyway, so his options are limited regardless.

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How would this come back at me? I haven't attempted a deal with numbers like this so...

It might not. But we live in a litigation happy world. If something happened that impacted the deal and, in the eyes of the t/b, harmed them, you can be sure some ambulance chasing attorney is going to be looking at all possibilities. . .including you. Not trying to rain on your parade, JC. But it's wise to be prepared for all outcomes.

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