Any creative solution to this deal?

[fudosan]

This morning a property owner answered my ad in the local paper and wanted to sell privately. It's a modern 3-br brick & tile house in a new subdivision in Henderson Height. The property is also listed with an agent for $400K+ but the owner just wanted to get $390K for the mortgage to avoid going to mortgagee sale. Looking at some recent sales, I guess the market value of the house is around 420K (I'm not familiar with this area, actually). I happened to visit the house few days ago with an agent and found a long line of crack across the kitchen floor area as well as the concrete slab outside the house (no cracks on the walls though). The owner is desperate but I cannot think of any creative ideas. My issues are (1) I don't have much margin of safety if I pay $390 and then sell (I'm in the buy-and-sell camp now) (2) The house may have a foundation problem. (2) I have an obligation to buy from the agent who brought the deal to me.

Ay win/win solutions here?

[xris]

Hello fudosan,

Interesting post.

The property is also listed with an agent for $400K+ but the owner just wanted to get $390K for the mortgage

The owner is desperate

How do you know these things?

2) I have an obligation to buy from the agent who brought the deal to me.

No you do not!

Any further information on this would be interesting.

xris

[PC]

All new houses sink. Hence cracking.
I'd make any offer subject to a building report.

If an agent with a valid listing agreement has shown you through the property - then that agent will need to be paid a commission.
You can try being sneaky. But if the agent finds out - you or the vendor will end up in court.
I'd haggle with the agent.

$30K margin would barely cover selling cost/tax if you decided to flick it.
If it's a new property - unlikely to be much opportunity to add value - especially in a falling market.

Buy & hold?
How desperate are they? offer $350K?
What rent can you get?

[fudosan]

Hi xris,

I know the vendor is desperate because she called again after I said I could not help her. She told me she has a mortgage with an Australian finance company and is paying about 20% interrest rate now because of the payment arrears. She has only one month and the lender will foreclose. I suggested to her to see a mortgage broker to see if refinancing is possible and found out further that she's scared to see any mortgage brokers because they charged her a lot. (I feel sorry for a lot of people who borrow without the knowledge how to manage debts.)

My agent took me to the open home earlier (unrelated to the call the vendor made to me today) and so I believe my agent deserves the commission if I buy the house (which is unlikely as of now).

[fudosan]

Hi PC,

The house is 5 years old and the workmanship is inferior, I may say. I told my agent I was not interested few days ago already.

I agree with you the $30K is too small to make it worth flipping especially in a market may be falling.

[xris]

Just to clarify something I wrote a few minutes ago…

Fudosan has no obligation to the agent whatsoever: the vendor does. If the vendor is silly enough to sell privately to fudosan (as well as talk directly to buyers, as s/he has already done to fudosan) then he will also (quite rightly) have to pay a commission to the agent.

Fudosan will not be taken to court (although he may be called as a witness). He does not need to haggle (about what?) or do anything else with the agent if he does not want to.

I agree with all the other comments of PC though.

xris

Fudosan,

Just read your last post. Please remember, unless you have signed a contract with this agent then that agent is not your agent: s/he is the vendor's agent. You may feel morally obliged to that agent, but that is a different matter.

[Cliffy]

Could be OK for a sandwich lease option.

Get the vendor to make up short fall between costs and what you can charge a tenant\buyer - better then what it's costing her now.

If you were to pass on the vendor's details to someone else who buys it, would your agent still be due a commission? Not sure of the ethics there.

[fudosan]

Hi Cliffy,

If you can help, I'll be glad to pass this deal to you, for a cup of coffee and teaching me how to do SLO (I couldn't make it to Dorien's SLO course this May as I'll be out of the country.) Pleaes email me.

[xris]

Hello fudo and cliffy,

Sounds like a good solution, but fudo, make sure you pay for that coffee! (a subtle referral back to an earlier drawn out thread).

Cliffy, I cannot see any reason why fudosan should not pass the details over to you or anyone else. If the property sells during the agency the young lady will pay the agent a commission. But that is her problem and her fault. (Yet another example of why selling privately can be fraught with potential dangers?)

xris

[fudosan]

If the property sells during the agency the young lady will pay the agent a commission.

The owner has an agreement with the agent to be able to sell privately as well.

[cube]

But not to someone already introduced by the agent!

[fudosan]

Hi Cube,

As far as I am concerned, if I buy, I'll buy throught the agent. That's my attitude.

[Stevegoodey]

Has anyone considered going to the australian finance company and finding out how much is owing and paying that to them.

Steve

[fudosan]

Hi Steve,

The vendor is with Liberty and is $8,000 behind. 390k still owed but ALL at 11.8% floating !!! The mortgage was arranged through a broker who charged $3000. I have asked a mortgage broker I use to contact her and see if refinancing and fixing at a much lower rate will help. I just want to help her even though I am not buying from her.

[DontPanic]

Its sad but this woman is living way beyond her means even if she could afford the repayments she has next to zero equity any fall in prices and she will have negitive equity.This is the ugly side of second teir finance, helping people to hang themselves.she should buy a house she can afford.Perhaps you could help her trade down to a cheaper house then if you are creative enough you may end up getting her old place at a better price