AM I CRAZY ?????to Take Back A Second Mort..
advice please! we have an opportunity to sell the house we live in which we really need to sell in order to move to fla. we finally have an offer but we have to take back a 2nd mort (about 25% on prop value) in order to make the deal. how supid is it for us to take this deal??? any help really appreciated!
Hi,
Spell out the deal and let us look at it.
True Value of the House.
New lst mortgage going on or taking over old one. If taking over why?
What is downpayment (big safety factor)
Was there a broker? How much comm?
Could he not set up a refinance?
Sales price of house,
amount of lst td
amount of 2nd td. and int, monthly py for how long.
Post it on line you will get lots of advice. and some of it rather good.
Cheers Lucius
rubbertoes,
Glad to meet you.
I will assume here for a moment that you are looking to get away from the snow and ice.
So is the property free and clear, will you make enough to be able to move to Florida?
Carrying back a second is not stupid, it is done all the time, it has more to do with your needs at the present time and how quickly you want to make the move.
There also seems to be some reason that you are considering carrying paper on the property, has it been up for sale for a long time. In other words what is your motivation for asking this question.
John $Cash$ Locke
The true value of the house is 78,000.
It will be a new first mortgage.
The downpayment is 1,000.
There was no real estate broker, however, the purchasers are using a mortgage broker.
Regarding the re-fi, would we be smarter to do a refinance?
The buyers are hoping to refinance at the end of three years, at which time we hope to get a balloon payment.
Sales price of house is 77,900
amount of lst 54,000
amount of 2nd 23,900
9.45% int, monthly pymt is 192 for three years, based on 30 years (with balloon)
Our biggest fear is that they will stiff us on the second.
best regards,
toes
Hi John Locke, nice to meet you too,
the snow and ice is definitely a factor in the move.
the property is free and clear
we will you make enough to be able to move to Florida.
We don't have a problem taking back a second, our only fear is that they go scumbag on us and our only recourse is to garnish their wages, if they have any, or to file a judgement, which we may never collect on.
Our motivation is that we are moving at the end of June and want best scenario possible. Is it a better scenario to re-fi the house, pull out the equity and rent it (using a local property manager) ?
Thanks for your help!
Toes
toes,
When you hit the beaches of Florida and you are lying there under the palm trees and NY becomes a fond memory I would leave the house behind and take the cash and my second and and use the second money to buy Pina Colda's while on the beach.
If you rent you could be in the postion to have to return if your property manager for some reason does not do the job properly. Now any repairs done you will be responsible for, then if it does not rent out right away or your tenants do not take proper care of the property or you have a vacancy factor, you are going to need plenty of Pina Colada's just to keep your sanity.
Take the money up front, take the second and bid a fond fairwell to NY.
This is only my opinion, of course being a Landlord or holding a toilet plunger in my hand is not my idea of rest and relaxation.
John $Cash$ Locke
thanks for the quick reply....i guess our biggest concern is getting stiffed on the 2nd....hate to give them a $24k discount.
best regards,
toes
Hey John, just noticed you are from tampa. we are relocating to crystal river.
how are the investment opportunities down there? thanks again,
toes
Toes,
Investing is fine wish you were here.
Take the second, take the money and do not go by way of Las Vegas.
John $Cash$ Locke
you might try a lease option with at least 10 % down they do all the maintenance on the house up to say 500-1000 dollars with a option for 3-5 yrs get enough monthly to cover any payments on house if u owe any then if they dont excercise option turn around and do it again u could also do a wrap around on a second dont know how that would work for u though. post your question on ****This URL Not allowed**** and on thursdays they have a segment on a radio station(linked on there web site) think its at 10:00am pt. u can ask them questions live, hope this helps have fun in FL.
$$$
If this is the type of advice you get on the site you are referring to, then I would suggest you stay on that site and not bring this advice onto a board for learning the proper way to invest in real estate.
Cheap shot trying to get a plug in for these folks.
John $Cash$ Locke
TCI Moderator
$$$[ Edited by JohnLocke on Date 02/14/2004 ]
thanks for the input. not sure what you mean by the wrap around and i guess we can't go to www.****. so if you could expand we'd appreciate. thanks,
toes
As long as you get the deed filed at the courthouse as a second then if they don't pay up you can foreclose on the property and force the sale subject to any homestead exemptions etc. I agree with John, take the $$
Toes,
laborer110, doesn't have a clue what he is talking about because it is bad advice.
He is probably some new person who fell asleep watching a late night real estate investing informercial and when he woke up he thought he was one.
John $Cash$ Locke
I totally AGREE with John, take the money and deal with what happens when that comes up. Any one that would take 10% over $54,000.00 didn't pass Math Class.
Lori
[addsig]
If taking back a second on the home worries you, sell the note after closing. If need be, wait one year to show a history of on time payments, then sell. You will get less money, but you will be done with the worry. You can't put a price on piece of mind.
You should definitely take the second back. It may seem wrong to some but I have foreclosed one piece of land three times. Twice I owned the first and the last time I held the second. The last it went to foreclosure I bought the first and still have the land. My net on the parcel is around $32,000 and I still have the land. That is why we invest..... Take the second and invest in something good close to your new location.
You probably should take the second, forget about renting or anything else and enjoy FL. The only thing that I wonder about is why the people are only getting 75% financing on the first ?!? They just want to get out of PMI??
Quote:
On 2004-02-15 22:24, tinman1755 wrote:
I totally AGREE with John, take the money and deal with what happens when that comes up. Any one that would take 10% over $54,000.00 didn't pass Math Class.
Lori
thanks for responding and excuse me in advance if i sound stupid but i'm here for acvice and am not sure if you are saying to take the money and run but that we are supid for taking back a 2nd of more than 10%. please clarify. toes
Quote:
On 2004-02-15 22:35, Worf wrote:
If taking back a second on the home worries you, sell the note after closing. If need be, wait one year to show a history of on time payments, then sell. You will get less money, but you will be done with the worry. You can't put a price on piece of mind. <IMG SRC="images/forum/smilies/icon_smile.gif">
Tahnks for the advice, does anyone know or reccomend someone who buys 2nds? how much would we have to discount it? thanks again, toes
Quote:
On 2004-02-15 22:39, bert wrote:
You should definitely take the second back. It may seem wrong to some but I have foreclosed one piece of land three times. Twice I owned the first and the last time I held the second. The last it went to foreclosure I bought the first and still have the land. My net on the parcel is around $32,000 and I still have the land. That is why we invest..... Take the second and invest in something good close to your new location. <IMG SRC="images/forum/smilies/icon_cool.gif">
so if we hold the 2nd... in order to foreclose we would have to pay off the 1st??? dont know if we could afford that. or am i missing a creative way of going about this? best reards, toes
Try to sell it without carrying a second.
If you absolutely have to, make sure the people have good credit and check references. I know someone who did this and the people they carried the second for never made a single payment. Ended up living in the house for a year and a half for free!
Best Riches,
Jeff Adam
[addsig]
the purchasers could only get appoved for 75%. that why we are leary about the deal but also need/want to get out of Buffalo. thank you, toes
Do you think that viewing a credit report or verifying past payment history might be a good idea before giving someone a 24k loan?
Brenda
The only problem I see is that you haven't included any closing costs? Who will pay them, you or the buyer?
Have you looked at their credit report? If not, take a look and decide if their credit is good enough for you to finance.
My opinion,
House is free and clear, so you make $54K upfront and have a $25K 2nd. 10yrs @ 9% interest is about $315/month. Not bad cashflow from a property you don't own anymore. Most people will at least try to pay for awhile.
Options if they don't pay are: 1) you could foreclose. You'd have to check on your states laws concerning this, but you may or may not have to payoff the 1st if you foreclose. There are always options. 2) you could file judgement against them, or garnish their wages. Wait on them, or the foreclosing lender to sell and collect whatever is left. 3) you could write off the loan as "bad debt," basically forgiving the debt. Do this and send them a 1099 for $25K in "profit" (for bad debt) will insure that Uncle Sam will at least get some of their $$$. You'll also get to take a tax-write off for the balance (speak with you tax advisor).
Roger
Folks,
I've read about this in one of Ty Hicks' books and I don't think anyone mentioned this, but would it possible to set up this deal with a "reverse flip" provision built in. Meaning that if the buyer defaults on making payments on the second, they will have to reverse flip the property back to the original owner and all the payments made on the second will go back to the seller as though they made them to the lender.
I'm not entirely sure how this works, so if one of the pros could comment and clarify, that would be great!
(i'm hoping to take over an income property and am considering asking the seller to take back a second as my downpayment...I was going to offer them this "reverse flip" option as safety - so that they wouldn't have the concerns that rubbertoes is having.
Thank you!
polina
[ Edited by posherov on Date 02/19/2004 ] [ Edited by posherov on Date 02/19/2004 ]
thanks for the idea. hoping someone can give more insight into that. toes
Quote:
On 2004-02-16 09:35, rubbertoes wrote:
Quote:
On 2004-02-15 22:39, bert wrote:
You should definitely take the second back. It may seem wrong to some but I have foreclosed one piece of land three times. Twice I owned the first and the last time I held the second. The last it went to foreclosure I bought the first and still have the land. My net on the parcel is around $32,000 and I still have the land. That is why we invest..... Take the second and invest in something good close to your new location. <IMG SRC="images/forum/smilies/icon_cool.gif">
so if we hold the 2nd... in order to foreclose we would have to pay off the 1st??? dont know if we could afford that. or am i missing a creative way of going about this? best reards, toes
Ultimately you would have to cure the first (make up the back payments) if that loan is behind. You would be getting the place back but still have received the 75% of the value when you sold it. You would then market the property.
If you get it back and then sell before the 1st loan can foreclose you would not have to make payments. Not for the naive but potentially easier than you think.
John
If you are going to take back a second, I can provide some 'tips' about what the 2nd should say so that it is more easily sold later.
One specific example...
Buyers do not like to see a balloon. They want to know that if the borrower has been making the payments the payments will pay off the loan. Stated another way, if the 2nd is seasoned and the borrower is current, a full amortized loan will mean no time bombs later.
If this is not clear just ask and I can go into more detail.
John
I already noted that a balloon will make it harder (more costly) if you want to sell the note. No balloon, fully amortized is much better.
As to the down payment...
If you are trying to sell the note, there is not enough equity above the note. The buyer will discount the note down until there is enough equity.
If the buyer can not raise a larger down payment and you want to sell to them, consider a 2nd and a 3rd. The 2nd would be set up so that you can easily sell it. The third would be much smaller and certainly more risky. As you were going to take back a 2nd the risk is actually less this way as you would be getting more cash early.
It things go entirely wrong you could just write off the full third or you can foreclose.
I know that this is a change to what you were thinking. I want to mainly get you to consider the risk and the possible solutions as if you were an investor and not the seller.
John
Quote:
On 2004-02-14 20:35, rubbertoes wrote:
The true value of the house is 78,000.
It will be a new first mortgage.
The downpayment is 1,000.
There was no real estate broker, however, the purchasers are using a mortgage broker.
Regarding the re-fi, would we be smarter to do a refinance?
The buyers are hoping to refinance at the end of three years, at which time we hope to get a balloon payment.
Sales price of house is 77,900
amount of lst 54,000
amount of 2nd 23,900
9.45% int, monthly pymt is 192 for three years, based on 30 years (with balloon)
Our biggest fear is that they will stiff us on the second.
best regards,
toes