Question about buyers with B and C credit...
I have a rehab for sale that has been sitting or a few months. It is priced well under it's appraisal value and needs zero work, all new everything. I got a call from a guy, "Bob", a few weeks ago about it. Bob tells me he has private investors in Florida that are still lending to people with B/C credit.
We are all away of the subprime fallout and this obviously raised a red flag for me. Bob proposed the following plan:
He puts a sign up in the yard, "creative financing, bankruptcy/bad credit okay, zero down! Call Bob". He then gets calls from these folks, shows the house, they love it, they fill out an application and he sends it to his lenders. Bob says all the buyer needs is a job and a 550 credit score. If approved, the lender will have an appraisal done on the house. Here's the key, the house has to appraise high enough to actually make this a deal.
We are selling this house for $73,900 and I know it will appraise for around $80-$85,000. When it appraises for this, these lenders will loan 95% of the appraised value to these buyers. Say it appraises at $85,000, 95% of that is $80,750, so that's what they buy it for. We then get our $73,900 and Bob gets the difference, of course minus closing costs, etc.
Anybody ever heard of this and if so, how the hell do we do these deals without Bob?? He swears up and down this isn't mortgage fraud or anything like that...