Portland, OR · Member since 2016 · 108 posts · 33 votes
Hey guys, so we have a closing scheduled for this coming Monday, and I need to wire $24,000 to the closing company for this house today (Friday) to have the funds reach on time for the closing. This will be my first home purchase and we are going to use the home for my mom to retire in. I am self-employed and show no income on my tax returns, so we had to go through private sources to get the funds. The first private lender (mom's friend) backed out a couple weeks ago, and just yesterday (Thursday) our other private lender (my dad) bailed on us. I don't know what to do now since both of our private lending sources bailed on us. We are very modest people and $24,000 is beyond our personal budgets at this time. Is there anything you guys can recommend? Is there anyone out there who knows a hard money lender who could work with us on this? I'm panicking because we really found the perfect place for my mom to finally be able to retire in peace, but now both of our private lenders bailed on us. Any advice on this would be hugely appreciated... we need to figure out what to do today (Friday, September 6th) and are nervous wrecks over this. Thank you for any replies.
@Chris M. You need to delay closing. That’s the only realistic answer. Delay closing 2-3 weeks and figure out how to finance it.
You will also likely need to use an actual lender as your “private lenders” aren’t really lenders and you’ll likely have the same issue you’ve been having.
Find a no-doc lender, pay the higher interest rate and put 25-35 percent down.
just a caution flag, when you say it just a great deal for 25k, perhaps you need to take a closer look for big hidden issues. if you can't find others in the same condition and price range, there is red flag for me.
Chris, I read your post with great empathy. When you mention trying online lenders, did you look at Lending Club, Marlette Funding, Prosper, and Upgrade? With your credit score, a personal loan may be quickly obtainable, without the lender relying on your personal income or reviewing your income taxes.
Did you try to negotiate a seller's finance? No money down. Pay either the interest they want or pay full price. That could work I believe if you can do that.
@Chris M. Since time is of the essence here, and you're locked in emotionally, I really want to see whose objection is dominating the negotiations. My best guess is that it's the seller's agent.
I'd be inclined to ask if you can deal with the seller directly. At this point in the game, I would still plan on paying the real estate agents, even if you're dealing directly.
I see exactly *no one* suggesting going with a Lease Option. You would negotiate a price for an impending sale in the future, say 2-3 years from now. You would set the price to have room for appreciation. So perhaps the future sale price for that timeframe might be $35,000.
If the property appreciates to at least that range after those 2-3 years, then you have the *option*, but not an *obligation* to buy at that time.
Get good legal advice, whatever option you choose to go with. Best of luck to you!
If it doesn't, then at least you've had a good few years in the place to save up for a purchase someplace else.
just a caution flag, when you say it just a great deal for 25k, perhaps you need to take a closer look for big hidden issues. if you can't find others in the same condition and price range, there is red flag for me.
The area that we are looking in is pretty depressed overall and $20,000 to $40,000 price tags are common. The owner financing guy wants to charge us $39,000 overall including a $5,000 down payment. I told him this evening that we can't do that much and requested he lower it to $30,000. My agent does not think the seller will want to do a closing date extension and that if we can't get the deal done on Monday that they will want to pull the deal. Now I suspect this owner financing guy might be the one who ends up buying it if we don't. This whole ordeal is so stressful that I am considering just walking away and trying to find something else. Another part of me wants to bite the bullet and wire the $24,000... but if something goes wrong/there's some kind of huge issue I wasn't aware of it would really screw me. Ugh what a pain this is.
If you want the house that bad sell the car. You don't need a 20k car if the house your mom would potentially be living in is only 24k...Fund the rest with a credit card. But in all honesty, I'd look into renting because it doesn't sound like buying a house is fiscally responsible at the moment. Just my 2c
Also, where is your mom living now? Would this be an upgrade or downgrade??
This house would be an upgrade in terms of the house but a downgrade in terms of the area. Her landlady recently passed away and the son plans on selling the property she is currently renting and all properties in her current town are much too expensive. She's been locked into a super low rent amount for many years now.
I am feeling more and more like I do not want to work with the owner financing guy. He wants me to sign a lease to own contract for the property at a price of $11,000 higher than we agreed to pay originally. Think we will just request a 1 or 2 week delay on the closing and try to sell the vehicle as you said.
24k?!? Can you pull something together?! Anything?! With your mom? If you're liquid net worth is less than 25k then I would be wary of moving forward with this transaction. Retirement accounts? Emergency funds? Access to a HELOC?
I don’t know you or your mom or even what this house looks like but it seems like your trying to rationalize a lousy deal and your way too emotional on this . Your a good son for trying but your mom is not in a position to be a homeowner she needs to rent an efficiency apartment at this stage given her situation . There’s nothing wrong or shameful with renting bro and I hate to say it but there’s a reason your mom is broke and can’t get a traditional bank loan . This is not financially intelligent and your going to absolutely lose your shirt trying to stick your neck out to buy this place .
@Chris M. - Depending on the seller, you could be perceived as not a nice person for getting under contract on a home you didn’t have funds to buy and taking it all the way to closing day. When the first lender pulled out weeks ago, you should have cancelled the contract unless your dad was ready willing and able to sign loan docs with you and give you his 24k at that time. What if a nice old lady moved out of the house, expecting you to close and buy the house today and you just didn’t, leaving her both with a vacant house and no money. If it’s a bank owned foreclosure then you didn’t hurt anybody (except the bank but they make bonkers decisions to hold properties empty for years anyway). You might lose every dollar of earnest money.
What you can do now is to tap into personal funds to scrape together the money and buy it, you can ask for an extension usually a week or two to liquidate some assets and they’ll probably grant it (I’ve had closings delayed 2 months because of lender issues). Or reconsider buying it for her entirely and plan for her to live with you or someone else (there are lots of rooms for rent for low amounts like $300-600/month). If this is your first home purchase, does that mean you are also renting? Between you and your mom, could you find a larger home with an in law suite to buy expecting her social security or whatever payments to help you pay the mortgage? Or if you buy this 24,000 house, are there any spare rooms for her to rent out for 300-600/mo to help pay the bills? I’m guessing the lenders vanished because there wasn’t an obvious way they were going to get their 24,000 back anytime soon.
I’m a newbie but I think selling the car is a great idea. However, that will take time.
The seller financer guy sounds like a potential predator if he is already looking to buy the house himself. Maybe he uses this type of lending offer to source deals for himself versus being focused on financing.
You have a good heart and good intent. The right thing will happen. This is not the only house at this price point with a nice backyard for your mom. Do your best to make this work but if it doesn’t come together move on and find something else. There may be a reason that will be revealed to you later, who knows? In the meantime, this is not the only house that will work even though it feels like it now.
Don’t worry about being embarrassed. Stuff happens. IMHO being successful financially means having no fear and no ability to be embarrassed. Try to put your emotions aside and work the problem. You are working the problem now which is great. Just see if you can dial back on the emotion, as much as you love your mother.
Also tell people you trust what is going on and see if they have any ideas or suggestions.
@Chris M. - I just read the rest of the posts. Don't force yourself into a worse financial situation on her behalf like selling a perfectly good car and financing another one (ie you sell the $20,000 value car running fine to buy a $40,000 car later payable over 5 years at x interest. Then you drive it off the lot and it's worth $30,000 and you owe 40.) Similarly, why agree to a $35000+ purchase price over 3 years of a $24,000 house? I'm sure that 20% ROI would be a great investment for a friend of yours (or you) to have instead. Your friends and family and satellite acquaintances will always give you better terms than a random hard money lender.
YOU HAVEN’T DISCUSSED HOW MOM FEELS ABOUT THIS HOUSE IN THIS AREA. You’re saying it’s a downgrade of an area. What if mom moves in a month and decides she doesn’t like the druggies or loiterers in her neighborhood and refuses to live there? Then you have a vacant house you’re likely to sell at a loss.
If the agent is on both sides of the deal and not your exclusive buyer agent, you cannot rely on getting good fiduciary advice from the agent. His or her job is to facilitate the transaction closing. Any info you disclose about inability to get financing may not be confidential, thereby leading the seller to cancel your contract. Additionally, how much shopping did you do? Is this the 20th house and you know it’s perfect or is this one of the first houses you toured?
Income to pay rent / mortgage: Mom makes $650/mo in social security? How much normal income does she have from her job which she owes all these student loans on? If she doesn’t have a normal job but has student loans, she should go get a normal job. It’s not reasonable to “retire” while having loans and expenses exceeding income. What has her rent been in the past? Would you be put into a bad situation if you’re forcing a situation where you’re now paying $300-500 per month towards her rent/mortgage?
Lastly, towns are usually much nicer to owner occupants than non owner occupied. You get one certificate of occupancy and they leave you alone vs potentially annual landlord fees, annual housing / fire safety inspections, etc. So the fees go up if the house is held in a name that’s not hers, yet obviously you don’t want the house taken by debtors if she’s not paying her other loans.
Overall it seems like you should once again ask friends of friends if they want to loan you the 24,000 and get paid $30,000 over the next 3 years. If nobody takes you up on it, see it as a sign from God and cancel this contract, hopefully getting your EMD back but if you don't the emd is paid legitimately for you increasing their holding costs because they were holding the house to sell it to you instead of any other buyer. DEFINITELY DONT SELL YOUR CAR!!!
If you have the $24k why not use it to fund the purchase of the house. If it will spread you too thin then immediately apply for a HELOC on your moms house since it will be in your name anyways? I have never taken out a HELOC but I don't believe they look at your income? Someone correct me if I am wrong.
With that said- and didn’t I see a 33% interest rate somewhere?- let this one go. You’re trying to put square pegs thru round holes. You are not financially ready to buy this house. With a $24k house you are going to need to shell out $$$ for repairs. Somewhere. There are going to be unexpected expenses SOMEWHERE. I promise you. Is this your first time purchasing a home? You seem very educated but if this is your first house it’s not as simple as putting down the $24k and moving mom in. What about insurance. Taxes. Closing costs. Repairs. Repairs. Repairs. They are going to be hidden somewhere if you haven’t seen them yet -
Hey guys, just wanted to say thanks again for all of your input and advice. We decided to cancel the deal. It was to be an out-of-state purchase, and moving my mom there would have been a big effort, and after discussing it with her more she decided she did not want to move that far away. I still wanted to buy it myself as an investment property, but with funding sources so limited I did not want to put myself into a very difficult situation with my business in order to purchase this house.
While I'm disappointed in some ways, relieved in others, I did learn a lot during this process. Definitely feel more prepared as we are actively looking for another opportunity and determined to purchase our first home this year. Truthfully I wanted to buy my first house 5-6 years ago but the market in Oregon became so insanely overheated that it was unrealistic for us. It seems to be cooling now.
Many of you posted a lot of great tips and links to resources I had not heard of before and I will be exploring these and thank you for it. If any of you are interested, I've got some key factors: time, determination, persistence, intelligence. If any of you are looking for a partnership where you would act as the lender, I am more than determined to purchase my first investment property before the end of 2019.