Discounting Notes
A year ago we bought a house on Land contract , paid full price for seller to carry mortgage. We believe at this point we paid too much .In discussing things with my realtor he says that property values have leveled off and it woudl still be worth about the same 140k as we paid for it.
We would like to enlist someone to approach the contract holders about buying out our our note at a discount (anonysmously on our behalf).
We do not have a great relationship with them due to the amount of lies we were told when we bought the protperty.
Does this sound feasible to you experienced in RE and if so hwo would we go about doing so?
Please help me out. I know people who buy these notes, but how does this benefit you? Other than having a new person holding your note, nothing else changes. The terms, price, all else remains the same. Maybe I am missing something. If I am, help me out.
[ Edited by rajwarrior on Date 01/24/2004 ]
As tex as stated, another investor will likely not buy the note just to give it to you. Notes are bought at a discount in order to make money, so I'm not sure how this can help you.
As far as the value thing goes, here's my take. You were satisfied at the time you purchased your property, why not now? Real estate does not automatically rise in value every year. In fact, some times it may drop. In the 80s and even today in some areas, property values have fallen by the thousands, making them worth alot less than when the owners purchased them. At the time of the sale, I see little way of either you or the seller knowing for sure what home values would be in a year, nor does it really matter. At the time, the price paid was considered fair by both parties.
What "lies" were told exactly to you? IF there were omissions, errors, and untruths told, then you may have some legal grounds for a settlement.
Roger
Oh I guess I wasn't very clear at all. I would be the one to actually supply the new" investor "the funds.
We bought the house "as is" but questioned them about mosture in the basement. They said it was damp in one corner. In a years time we have water come in on 3 walls. Have not gotten estimates for waterproofing yet. One week after we bought it, I saw water in the basement ceiling (drop ceiling) took down the tiles and discovered not only were the water pipes not leaking but there were 8 extension cords powering the various lights in the ceiling as well. Upon further investigation and removing the majority of the ceiling, we also found the furnace was running on an extension cord.
We have since put in an entire new electrical service and rewired all of the lights.
Speaking of the furnace, there was no filter on it and when I went to find out how to replace it, there was no place for it either. After asking the sellers, who installed it and why it didn't have a filter, we found out it was a brother -in- law that used to work for a heating contractor. It had over 500.00 in damages from the incorrect installation and I STILL have not found out if they had pulled a permit for it. They said it didn't have to have a filter, yet i can't find a contractor that says this is ok.
It came with a pool, that was "almost brand new" and cost me upwards of 150.00 to get running because it was completely trashed. (The pool being a minor issue.)
The husband was a do it yourselfer, and although the cosmetic appearance was good, the work done was shoddy, cheap and half done.
One small for instance, all of the , electrical outlets weree new with new overs on them. Giving a buyer a cozy feeling about proper upkeep. However soon all 14 of them were either falling out of the wall or falling into the wall.
When replacing them we had to install supports behind them (they were not attached to anything solid.) then patch everything .
We have some sort of septic gases back up into the house from time to time. Again they denied this ever happening even though we first noticed it 2 days after moving in. WE are still investigating this issue.
Just a lot of things that anyone with half a brain knows didn't occur overnight.
Is this buyer's remorse? Not really. We love the location and the property. I still love the house. Should we have had it inspected by a professional, you bet.
If I had been on these boards prior to purchasing this property, I would have been much more savvy about how this was done and what I paid for it.
As for being happy with the price..at that time,Ii thought it was the best thing to do. Now I know differently.
Last but now least, after we fix everything the right way, we still will not be ablt to re-coop our money from what the realor told us. In the end that is why I am looking for a way to dicount the note.
Sorry, this was so long.
Respectfully,
Barbann
[ Edited by Barbann on Date 01/24/2004 ][ Edited by Barbann on Date 01/24/2004 ]
Barbann,
Sorry for all the troubles with the property. You've already said that advice I would have given which was make sure to have it inspected, expecially when buying "as is."
If you live in a state that requires seller disclosure statements, and one was not given to you, you may have some recourse against the seller. Improper wiring and installation of things could be a legal issue for the sellers as well. These things should be discussed with a local, experienced real estate attorney.
From your comments, IMO, there was nothing wrong with the price of the house. If it's worth $140k today, it was probably worth $140K when you bought it, especially with owner terms. It takes much longer than a year to build any real equity in a home, especially when you consider the fees involved selling thru an agent. You're just caught in one of the situations that gets homeowner's calling the "we buy houses" ads.
Back to the discounting the note idea. The problem still stands. IF you find an investor willing to buy the note, they will only be doing it to make a profit. You're going to have to decide how they can get it. For instance, you could say, "I'll pay you $130K for this note, IF you buy it from the current owner." This way, the investor knows his sell price and can negotiate his "profit" by his buy price, for example of $120K. Another way is to say I'll pay you $5K over whatever you pay for the note. This way his fee is set, but yours is not.
It should be an experienced notebuyer, too. One that won't unknowingly break any brokering laws. The last thing you need to consider is whether the current owner of the note will, or is able to, sell the note for the price you want to pay.
Roger
Thank you Roger for your reply. And yes you make sense. I do not know for sure if they will sell the note, but most folks are really motivated by 100k in cash. Anyway I thought it was worth a try. Worst case they could say "NO" but then it might be yes and we could save ourselves a few bucks.
I am from the "You never know until you try school" so I will at least continue with this direction until I am officially shot down. I amy also take your advice and go to a real estate attorney just to see if we have legal grounds to ask for reduction.
Barb
Barbann,
I'm not sure how you intend to pull this off. If you have cash, or cash available to you, you could negotiate the discount yourself.
"Mr home seller. I'm about to come into some money soon, and I have some decisions to make regarding what I intend to do with it. Frankly, with the terms I have on the property right now, I could do better investing it in a few other areas. However, If you were to make it worth my while, I would also like to have a free and clear house. Would you consider discounting the mortgage?"
If they accept, you'll have to come up with the money of course.
A lump sum of cash might be more attractive to them today than ongoing installments.
It's worth a try.
Good luck,
Jeff