Found a tb too quick!

[verbatim 1]

BEAUTIFUL home, owner calls after its listed for a year. The numbers:

 

owes 185 comps around 210. I put ads up for 213k with minimum of 4k down. After the 1st showing a family gives me a application and 3k check stating they can come up with more but would like to put the additional $ towards renovating an unfinished room. Now I told him we need to get his option $ as close to 3% [$6,400] as possible so our credit repair team can get him a fha loan in the next 12 - 18 months. This is when he says " I'm VA so my down payment wont be 3% but will only be $500. I told him we need as close to 3% as possible because previous experience shows the higher the initial deposit the better care the t/b takes of the home. He's extremely motivated and saw other interested buyers at the showing as well.

 

What do i say to make him feel good about putting an additional $3400 [total of $6400] down now instead of towards renovations and how do you address the issue of him qualifying for va financing?

 

Any help offered would be greatly appreciated

 

Thanks in advance

[EQUITY NOTES 0]

Hi

 

Read your post with interest, and was wondering why they cant wait until it closes then stsrt fixing there own home

 

Just my 2 cents but when they start telling how they want to do your deal it seems like they are, a sign goes up to me as to whats the deal here

 

I have found when i start to back off on option money they never stop asking for less down, and may look for other concessions from you

 

Iam not as experienced as some investors here, but isnt there a problem with a tenant buyer remodeling portions of a home?

 

I think it may also create a problem if your contract goes to court, gives them an edge as to equity interest in property

 

May be because you got a fast t/b your willng to concede, would you if you had spent a lot of time marketing for them?

 

I myself would not buy into there argument (they can wait a yr to fix a room)

 

This may be the reason you got them so fast, they just seem like a problem t/b

Tom

[<Steve> 82]

I would look at it like this:

 

If the property just came available and you have a "good" tenant/buyer for the house right out of the gates, you haven't put much time in and that is a quick $3K and your done. However, if the phone is ringing off the hook with a lot of people interested in the house you may want to hold out for the full option consideration from the next potential tenant/buyer.

[MichaelC 160]

verb, the t/b's shouldn't be doing any remodeling to the house until they take title. So their excuse for needing the money for remodeling rings hollow. Get the additional option consideration upfront and remind them that the option money is credited in full towards the purchase price, as are the rent credits. This, in turn, means lower monthly mortgage payments for them. Those lower monthly payments each month means more money to do the house upgrades they want to do. In other words, sell the advantages. If they're serious a happy medium should be found. Likewise, don't be adamant about the $6,400. If you can get, say, $4,500, well, that's not a bad days work now, is it? Do the deal and move on to the next one.

[pilot76180 51]

If they don't put more money down, they very likely won't buy the house, and they very likely wont' actually do anything to finish the room either. That's just the way it is. VA and USDA still allow 100% financing, but VA is now up to 620 requirements, so it's not like the old days. VA is more like FHA it seems, so I'd veer away from the finance perspective of it, and let them know that they can finish the room after purchase, and as soon as they have the remaining $1k or whatever it was, then you all can close the deal.

Have you pulled credit on them yet? It seems like normally when people give you a check and the app at the same time, a lot of times they are hoping the check blurs your vision on the app. Matter of fact, I'd say in my experience...that's been true about 95% of the time.

You said Min. of $4k down, but then $6400 down..did you market it at $4k down?

[verbatim 1]

Equity Notes: His eagerness to start fixing the home puzzles me also. It's only 1 attic/ storage room upstairs in a 1.5 level home where the door can easily be locked to prevent his children from entering. The seller initially had a job relocation in March that has been pushed to April. The buyer requested permission to have workers enter the home in Mid March should the sellers leave early. Again, puzzling. He's a police office and ex realtor with an adorable looking family who from all outward appearances seems like the perfect candidate. The seller liked this couple more than the others, but we haven't gotten that credit report back!

 

Steve: Very good point, I was thinking the same thing.

 

MC: I will let him know that he can't do any repairs until he takes the title. Being a Realtor in the past he should already know the fine line he's walking towards equitable interest and should have no problem waiting. Had he said he wanted to use that $ to pay down some bills that would have made more sense. And I won't be adamant about the $6,400 and will take 3-4k in a second. I would like to get the home out of the current owners name by getting financing for a new buyer. If that requires them putting down as close to 3% as possible & making extra monthly payments hopefully that can be agreed upon. I'm all for quick cash though.

 

Pilot: Credit hasn't been pulled yet and the check may be an attempt to blur my vision, but when he said he like the home and what's the next step I said "an ap & a check if you're serious." I also did market it as "Minimum down payment of 4k" due to the fact that other rent to own sites in the city market homes for < 3%. Many of these folks are in the business of leasing for a year, kicking the t/b out, & re-leasing with no intention of selling. I was just trying to be competitive as this is my 1st co-op assignment.

 

Thanks for all your input you Jedi Masters! Any additional wise words would be greatly appreciated

[pilot76180 51]

If you marketed it at Min . $4k down, it'll be hard in my opinion to get more than $4k without appearing as a sham, so be careful there.

Pull the credit and let us know how it looks!

Things to look for are judgements, tax liens, foreclosures, bankruptcy, as well as late payments in the last few months.

Keep us posted!

[verbatim 1]

Ok cool. Every caller I've talked with was informed of the fact that 4k is the minimum but fha requires 3% down and the results from my mortgage broker will let us know how flexible we can be with that 3% etc etc. This was done in an attempt to not make it look like a sham. I've noticed by looking at some of the homes users on the board have on their websites are < 3% of the list price which confused me but i thought, when in Rome, do as MC does!

[speedingpenguin 19]

I'll throw my 2 cents in here 'cause your situation sounds eerily familiar to a situation I was in on a deal I did over the summer...

 

The "improvements" were a new driveway and a fence for the yard (with the seller offering to hook them up 'cause he knew someone who did fences and owed him a favor), they seemed like the picture perfect young family, self employed with a very good appearance as far as the business went... Wanted to get the improvements done before winter (understandable around here) and the payments were spread out over a few months for the remaining option money.

Long story short, they turned out to be THE tenants from hell. I collected 1 of the 4 payments I was supposed to get, and even that involved NOT a very fun situation to be in (let me assure you). Nobody's fault necessarily, it took us by surprise because from the outside at first nothing smelled sketchy and the improvements were quite understandable and the seller was just as excited as they were and I was.

 

So to me, it sounds a little weak... at least worth investigating further (And don't be afraid to stand your ground... You're calling the shots, if they're not the right people for the deal according to YOU, don't be afraid to straight up reject them. If they're serious, they'll come up with an extra $1,000 bucks to make it work. It is a house, after all...

 

Be careful and good luck! Congrats on the deal! (Whether these people take it or someone else)

[verbatim 1]

Things to look for are judgments, tax liens, foreclosures, bankruptcy, as well as late payments in the last few months.

 

candidate 1 experian 652 trans 539 eq 531

Has a credit card with a $500 limit and a 84 month truck note with 48 months left and a 28500 balance. State Tax lien for 1300 filed in 03/2010 & reported 10/10. Says income is 4600 per month.

 

This guy just has little debts and 3 big black marks, 2 evictions [in 2000 & 2006] and a tax lien.

Credit report summary:

Trades: 9

Balance: $28500 [owes on a 50k truck]

Terms: 850

Delinquent 30 days: 4

Collections: 12

State Tax lien for 1300 filed in 03/2010 & reported 10/10

 

Asked him how close to 3.5% he could come up with for the down so we can get him approved for a fha loan and he told me he's v.a. and wont need more than $500 for a down payment, but he did give me a 3k check while running his application. So I'm still not sure how close to 3.5% of 213k he can come?

 

candidate 2 experian 613 trans 553 eq 544

so this guy has a repo, a lot of little debts but luckily no evictions or foreclosures. He also has a judgment against him [original amount was $180].

He has no accounts open now and i think just establishing credit will help him, but will it help enough to get him financed.

Credit report summary:

Trades: 7

Collections: 16

Public Records: 1

 

says he can come up with the 3.5% [$7500] in a week when his income taxes come in.

 

The mortgage guy at a credit repair company told me he could have them both up to a 640 in 6 months for $600. When I emailed asking if the down payment needed to be made out to a title company or my company he didn't answer. He did say he was closing down his credit repair company to work for a home builder and would only be assisting their clients.

 

Owner likes # 1 as he's a cop with a family. # 2's family is out of town so we haven't seen them yet. What should me next move be?

[pilot76180 51]

Whoa!!!!

These are two GUYS????!!?!?

Hmm....OK, here's the deal.

They can't qualify TOGETHER for the loan. They have to qualify individually, so ONE of them has to be able to qualify for the house on their own based on income and scores.

It's not like the old days, and this isn't freakin animal house with a bunch of guys going in together.

Second guy sounds better.

You need to look at his DTI and see if he could qualify for a $200k house.

BTW- the credit guy that said he could get them up 100 points in 6 months is on crack...hmmmm...wonder if that's why he's shutting down the credit biz.....

[verbatim 1]

I apologize, these are two separate applicants & i am trying to choose which one to put in the home. Of course my gut says the 1 with the biggest down but a part of me does want the 1 who'll get qualified 1st also. They both want it and are waiting to let me know if they got the home or not.

 

John I was thinking substance abuse too when i got that email, but i figured maybe he knew something i didn't. Is it possible that either may qualify for a loan in 18 months from the info i have given or is it to vague?

[speedingpenguin 19]

A cop with 2 (fairly recent) evictions, that's kinda strange....

[pilot76180 51]

Yeah..I'm with Chris...odd.

OK, I get it now verbatim...it's just with all the pied pipers out there nowadays playing skin flutes you never know....

I'd go with #2, but here is what you want to look at.

How long ago was the repo

What's his income

Is he 1099'd or W-2'd

[colehaynes 0]

Where can you buy a skin flute? Sounds cool! lol