Unique Situation While Flipping First Home

4 Replies

Hello All,

My house is currently sitting on the market (going on two months) and I finally received an offer the other day.  Unfortunately, the offer that was presented was well under my asking price. The woman fell in love with the house as soon as she walked in, but her pre approval fell well short of my listing price.

She asked if she can buy the house at the less than asking price and then send me monthly payments until she hits my original listing price.

I would love any advice if anyone has experienced anything similar to this situation.  I know I will have to deal with legal to get paperwork situated to guarantee those monthly payments.  This is something I've never dealt with and I'm going back and forth with considering this deal or leaving the house on market.

Let me know, guys!    

Andrew W.

I believe the greatest security you could put in place would be to take a 2nd position lien on the property behind the bank her financing is coming from. This way in the worst case scenario you would at least receive any returns before her. Depends on the ultimate fire sale price though from the bank. You may end up getting nothing in worst case scenario. Pretty risky. 

If you carry a second mortgage then you can foreclose if she doesnt pay you. But you will get a used house, possibly painted in an unusual style or smelling of neglected pets, and a lien. How much is she contributing as a down payment? What is her employment history? Entrepreneur or just doesn’t make enough to qualify...or too much debt. Has she ever owned a house before? My husband has banned me from renting to single moms because they don’t know how houses work. Banks can afford the risk, can you? What about a price reduction or an incentive of some sort to get your house sold to a qualified buyer?

The pre-approval is the maximum her lender things she can afford.  They have looked, at least initially, at her financial sitaution.  You would be giving someone a second position loan (always risky) above the amount a lender things she can afford.   

Your second position loan would need to be disclosed to the first position lender.  Unlikely they will approve her first position loan in that case.  Failure to disclose would be loan fraud on her part and you would be contributing to that crime.  

Were you to manage to make this happen and she didn't pay you, you would have to foreclose.  Best case you get paid off.  But if not, you get it back, subject to the first.  I'd guess you would have used the proceeds of the first mortgage to pay off your lenders on the flip or invest in your next deal.

IDK about your market, but around here if a new flip was on the market for two months, espcially during prime buying season, without offers I'd assume its significantly overpriced.