All Forum Posts by: Bryce Y.

 Yep, that's how I see it.

Yes there is lag time.  It was originally listed for $309, then dropped to $295, and went pending on 7/18.  As you can see zillow doesn't even reflect the change in list price.

Hey Henry,

Maybe it is too late in the day and my brain is shutting off, but I'm not really following you.  If I'm reading this correctly, you're saying it may not actually be under contract?  Joe was asking how they could advertise it for less than the price on zillow.  I think he was assuming the price on zillow was the price it was actually under contract for.  I was just pointing out that it wasn't.  

Of course one should do further due diligence if they are serious about buying the property.   I have seen some big wholesale companies ghost advertise and I agree that it is scummy.  

Oops, I misread it and saw that the listing is still active.  I think my brain really is shutting off!

They have it under contract for less than $285. The "under contract" price is not reflected on zillow or MLS.

I'm not sure your parents fully realize the potential burden placed on you if you decide to buy the house.  What happens if you buy it and your folks fall on hard times and can't pay the rent?  I'm guessing you're not going to evict, so that leaves you eating the mortgage payments every month and makes the relationship awkward.  And what if you fall on hard times and can't pay the mortgage?  Now you have a foreclosure/short sale on your credit and they get kicked out of the house.  I don't mean to sound so gloomy; I think it's great you want to help your parents but it's important to realize the full extent of the possibilities, both good and bad.

I think you should continue convincing your parents to sell and rent.  It's really not a terrible position to be in, assuming they can walk with $50k.  As for the RE agent, take his/her advice with a grain of salt.  Agents don't get paid unless a sale happens.

 I appreciate the reply.  Like I said earlier, I realize the risk is small in most cases, but I've read a lot of sub2 threads on here and there are a lot of "be careful if the lender calls the note" and "don't worry about the lender calling the note - it'll never happen" type replies.  My goal in this post was to use some real numbers to help me understand the risk better.

About how much is the going rate? I heard (where I am) that investors will pay 70% of UPB for an unseasoned note, so I figured if it is performing for 5 years they would pay close to par?

Meh, I was hoping this wasn't going to turn into a discussion about the likelihood of the banks calling the note due.  I know it's very unlikely, but I feel it's prudent to address ALL the risks involved.

As I understand it you, the investor, have 2 options:  1) have the end buyer refinance, or 2) pay off the underlying note in full.

For scenario 1, how much time does a bank give to pay off the note?  It will take typically 30-60 days for the end buyer to refinance.  Are banks willing to wait this long?

For scenario 2, if they can't refi here's how I see it.  Let's take an example where the seller is 5 years into a loan with the following terms:

$90,000 original loan amount

5%, 30 year fixed

PI of $483.14

At the end of 5 years (when you purchase it sub2), you will be starting with a balance of $82,645.86.  

Now say it needs no repairs and you do a wrap with the following terms:

$100,000 price with $10,000 down

$90,000 loan

9%, 20 year fixed

PI of $809.75

Five years down the road the bank calls the underlying note due. The balance at that time is $73,207.86. Now assuming you don't have the cash to just pay it off, you find a note buyer to buy the wrap note. The balance at that time is $79,836.34. I have no idea what the going rate is for a SF performing 1st for 5 years, but let's assume 90% of UPB or $71,852.71. So really you would only need to come up with the difference, or $1,355.15.

Even at 80% of UPB you have to come to the table with $9,338.79. This shouldn't be difficult considering you took a $10,000 down payment 5 years ago. Obviously the situation is more grave if the bank calls the note earlier, and consequently less grave if they call it later down the line.

It seems to me as long as you keep adequate reserves this worst-case scenario is not so daunting.  Soooo, what am I missing?

I am not suggesting "burning bridges".  You can end the partnership amicably.  It just sounds like you guys are on different planets when it comes to analyzing a deal. In my experience it is difficult to get someone to change their way of thinking.  If you can do it, kudos to you, but I am suggesting your efforts may be better spent finding deals or another capital partner.