First call from Craigslist!! - Is it a deal?

Question

Getting calls from my ads! I’m excited - this will be the first seller I’ve met with.

Received a call from a couple who cannot afford their house payments. Will rent another home since their credit is not good. Home was built in 2012. He has owned for 18 months. 3-4 bed 2 bath. In good school district. He owes 140k. His pmts are $1000 piti.

New homes in sub are being sold at $175k.

His home is listed and he is asking 159K.

A similar home was sold for 155k in June.

I will meet with him and his wife tomorrow.

I am thinking a Lease Option would work. I would pay seller (directly to bank) $1000 month and option house for $150k.

I would option to buyer for 175k with $1250 rent payments.

I would consider subject 2 but not while it is listed.

I haven’t done one of these for almost 10 years!

Any feedback on this deal would be greatly appreciated.

Thanks in advance! Carrie

Carrie Collyer · Answer

Thanks Jack. Very helpful as usual.

John Jackson · Answer

@Carrie  Collyer   We have a mortgage improvement specialist that works with our clients and takes them all the way to finance.  When it's time, I put the seller in touch with the title company, and tell them to get their survey et.c to title.

If the T/B doesn't close, it doesn't mean much to us, although we'd normally just reload the house, but ideally the T/B will close.

Carrie Collyer · Answer

Ok @John Jackson . :)   I understand that we want the the transaction to close, but we have put the buyers in the hands of a credit counselor. Wouldn't the mortgage broker be the one to make sure the seller has all of their paperwork together.

Just curious what if the transaction did not actually close? What would that mean for us as the Lease Option assignor?

John Jackson · Answer

@Carrie  Collyer   I like that you call me Jack...it keeps things secretive...WHEEE!!!

Yes, I look at DTI  (43% DTI for FHA) and I look at recent collections, tax liens, judgements, BK's, etc.

If they have the down payment......who gives a crap???

You better make sure they are in a good position for finance.

Or at least CAN be in a good position.

We base everything on current FHA guidelines, as most clients go FHA.

Yes, I am involved afterwards as we have 3 getting ready to close this month and I have e-mailed the owners to get their surveys to title along with payoff.

Carrie Collyer · Answer

You may be right Jack.

May I ask @John Jackson or @Brian Gibbons , I need to see that the buyer has capability to purchase, but am I involved after I have assigned the option to my buyer? Also, is 12 months a typical time period that the buyer leases before purchasing?

John Jackson · Answer

@Carrie  Collyer   since you have not done this in 10 years, and the numbers are pretty tight....I would suggest a simple assignment.

I think @Brian Gibbons   and I are on the same page that SLO's are not for the faint of heart.

Offer them full price and do a simple assignment.

Carrie Collyer · Answer

I appreciate your responses @Simon  and @Brian .  I'll check out the presentation.  Thanks!

Brian Gibbons · Answer

Hi @Carrie  Collyer

You could sandwich, or lease option assignment.

If you care about the buyer getting the houser, you may want to tie the sale to a new appraisal.

The key to the seller talking the deal is that the seller can make more money your way (LO or SLO)

Who is paying the agent?  You may want the listing to expire, avoid the commission, or have the seller pay the agent $500 to release the listing.

@John Jackson might want to jump in here.

Here is a presentation to sell to the seller.

http://www.biggerpockets.com/blogs/3/blog_posts/29012-how-i-talk-to-sellers-with-no-equity

Best of Luck!

Brian

Simon Campbell · Answer

Your scenario is only viable if they are not in foreclosure. If they have fallen behind in their payments, then in order for a lease option to be viable, you would need to make sure that their mortgage is in good standing. Other than that, it looks like it could work for you.