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DeeLight

What would Jonathan Rexford do?

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K, no slight intended for all my fav pros here cuz prob allll of you have answers to this inquiry. I got this reply from yesterday's CL mailing (email #1):

 

"I would but I owe more tab it's worth like half of the world .you can look at it and we can draw up contract but I am around 35000 up side down ." :( poor thing

Refer her to a short sale and split the goodies??? Tell me, tell me :P

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K, no slight intended for all my fav pros here cuz prob allll of you have answers to this inquiry. I got this reply from yesterday's CL mailing (email #1):

 

 

"I would but I owe more tab it's worth like half of the world .you can look at it and we can draw up contract but I am around 35000 up side down ." :( poor thing

 

Refer her to a short sale and split the goodies??? Tell me, tell me :P

 

Well, I know Jonathan was on a call we had and has had some situation(s) like you are describing. Basically what you can do is a long term lease purchase (several years) for the equity to increase in the property. Then in the option you would put monthly rent payments are equal to the underlying payments on the seller's mortgage. Then for the price you would put "purchase price is the loan balance at the time of sale".

 

Basically the seller would get nothing but debt relief (make sure they understand this). Their only other choices would be 1)Stay in the house and keep making payments 2) Let the house get foreclosed on, 3)Short sale (still a ding on their credit).

 

If the buyer exercises their option in the future, then their price is the "loan balance at the time of sale", and hopefully the property is no longer under water.

 

I haven't done this kind of deal, but hopefully Jonathan will give his input. But, I think this is pretty much the long-and-short of it.

 

Erik

 

Oh, and almost forgot. You assign the contracts and get your assignment fee.

Edited by ErikOk

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Erik, you are so kind and helpful. Thank you so much. I like that plan. I will call him in the morning.

 

I have 2 others that I think it would work for too---but those are because the "investor" has ridiculous prices on them :angry: This guy has about 10 that he says he might want to unload from his inventory. He wants looong term leases so that it gives the market time to recover. He may be dreamin'.

 

I don't want to be part of any scammin---could anyone get hurt? Is there any harm in doing this kind of deal---lease for 3 years and then buy at fmv? How would I protect the t/b? Is there a clause that would be added to the docs that would explain that----giving the t/b a clear understanding up front?

 

I can get the deals---it's just the darn strategies & paperwork!!

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Erik, you are so kind and helpful. Thank you so much. I like that plan. I will call him in the morning.

 

I have 2 others that I think it would work for too---but those are because the "investor" has ridiculous prices on them :angry: This guy has about 10 that he says he might want to unload from his inventory. He wants looong term leases so that it gives the market time to recover. He may be dreamin'.

 

I don't want to be part of any scammin---could anyone get hurt? I don't see how if everyone is on the same page. Is there any harm in doing this kind of deal---lease for 3 years and then buy at fmv? You would probably need something longer than 3 years. I think Jonathan said 5+ years. And remember, they are not buying at FMV, they are buying for the remainder of the mortgage balance How would I protect the t/b? Is there a clause that would be added to the docs that would explain that----giving the t/b a clear understanding up front? Should be clear with the length of the lease, rent payments (equal to the seller's mortgage payments) and the sale price (loan balance at the time of the sale). Basically the buyer is paying down the seller's mortgage and whatever that balance is when they buy is the sale price.

 

As far as protection for the t/b and seller, if you are using MC's contracts, there is a financing clause in there. I suppose you could put some sort of clause in the contract that would allow the buyer the right to renew if for some reason the property was still under water at the end of the original contract.

 

I can get the deals---it's just the darn strategies & paperwork!!

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Erik, you are so kind and helpful. Thank you so much. I like that plan. I will call him in the morning.

 

I have 2 others that I think it would work for too---but those are because the "investor" has ridiculous prices on them :angry: This guy has about 10 that he says he might want to unload from his inventory. He wants looong term leases so that it gives the market time to recover. He may be dreamin'.

 

I don't want to be part of any scammin---could anyone get hurt? I don't see how if everyone is on the same page. Is there any harm in doing this kind of deal---lease for 3 years and then buy at fmv? You would probably need something longer than 3 years. I think Jonathan said 5+ years. And remember, they are not buying at FMV, they are buying for the remainder of the mortgage balance--oh yeah I forgot How would I protect the t/b? Is there a clause that would be added to the docs that would explain that----giving the t/b a clear understanding up front? Should be clear with the length of the lease, rent payments (equal to the seller's mortgage payments) and the sale price (loan balance at the time of the sale). Basically the buyer is paying down the seller's mortgage and whatever that balance is when they buy is the sale price.

 

As far as protection for the t/b and seller, if you are using MC's contracts, there is a financing clause in there. I suppose you could put some sort of clause in the contract that would allow the buyer the right to renew if for some reason the property was still under water at the end of the original contract. Good idea. Wow 5 years!!

 

I can get the deals---it's just the darn strategies & paperwork!!

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Dee,

 

It would probably be a good idea to: 1) find out how many years the seller has into the mortgage, 2) how many years remain, 3) mortgage balance, 4) if the mortgage is fixed or adjustable (i.e. can the monthly payments increase?). I think if the mortgage rate is too high then it may be a deal killer, unless maybe the seller could refinance at a lower rate.

 

Then put these figures into an amortization schedule (online calculator) and see the mortgage balance 'x' number of years into the future. Showing this to a buyer would help them understand that the payments they are making on the mortgage are reducing their final purchase price.

 

Again, I haven't done a deal like this and I hope Jonathan & others chime in.

 

Erik

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The gamble in the long term lease option approach is that none of us know the direction the market is headed. If events cause the value of the property to fall further, the t/b is left holding the bag. Likewise, if values skyrocket, the homeowner will think he was taken advantage of. Of course, all of that is out of our control but where there is money involved, emotions often override rationale. Offer full disclosure, sleep well at night.

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Thanks for the tutorial Erik. I totally would not have known all that. Do people that aren't lucky enuf to have you guys just learn by trial an error :blink::wacko::(

 

Michael, I think I read on NI that a clause could be put into the contract that if the market raised the price above xxx then the purchase price would be adjusted---and the same if the market dropped below xxx . . .

 

Does that work?

 

I don't think this strategy will work with the "investor" with all the props. Unless he knows something I don't he seems like an idiot. Now, keep in mind I don't usually use that word for people. But this guy says he has great rental props and wants to unload some. When I checked the comps---honest, I swear, they were all low price props and $50k or more OVER fmv priced. AND he says he's happy. Not only that he wants to charge over fair rental price. sheeesh

 

Maybe it's just another episode from The CREI Addams Family show. :lol:

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Michael, I think I read on NI that a clause could be put into the contract that if the market raised the price above xxx then the purchase price would be adjusted---and the same if the market dropped below xxx . . .
You may have read it here, but it's nothing I've ever written or said or condoned. I was taught from day one that leaving the option price out is referred to as an illusory contract because the contract is missing a key element, namely the purchase price of the property in question. What happens if the buyer and seller can't agree on the price later on? I see nothing but legal hassles if you leave the price open ended. Keep things simple, lock in the terms today.

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Two approaches. One would be a long term lease option. Such as loan balance and term and the other is a short sale. 35K is a mute point depending on the value of the home. If it is 350K I would do a long term lease option assignment tomorrow. But if it is 100K then it is a short sale.

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Thank you Jonathan. this is a nicer home in the greater Phoenix area so I'm going for a long term l/o. Do you just add adendums/special clauses to the MC contracts?

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Our wording noe states that if the appraisal is less than the option price the landlord retains the right to negotiate the option price.

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