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Here is the situation:
Option contract to buy a house for $18k
Trying to sell the house for $39k
ARV: $78k
Section 8 rent: $1196
Market rent $900Seller is in tax foreclosure with lawsuit filed, but no notice served, with almost $13k in delinquent property taxes.
Seller wanted $5k for the house if I could pay off the taxes.
House needs a lot of work; exterior is in excellent condition, but the interior was vandalized, and the foundation is in really bad condition, that will need complete leveling, reflooring, besides general updating and rehabbing.Questions:
1. How do I transition out of an Option contract and get paid when I sell the property to an investor Buyer?
1. When I get a buyer should I use a regular TREC contract (Texas real estate realtor form) with the house owner as the Seller, and the investor Buyer as the Buyer?
2. Or do I keep myself in the middle, and do a double close
3. Can I do a closing without using a double-close if I do NOT want the Seller, not the Buyer to know my profit?The Seller constantly lies, and I paid them money from my own pocket to get them mobile again, and they changed that narrative, and have been all over the place, besides constantly lying. Now they think somehow they are entitled to get more if I get more.
I plan on recording a memorandum, after I file a release from the previous buyer -investor who previously had the contract..
So, again: how do I transition from my option contract when I find a Buyer? What contract do I use? How do I avoid a double close.? Who does blind HUDs in Dallas area?
Don Wede,
Thank you for your response and suggestion. Assigning my contract would still bring the real numbers on the HUD. I do not want the Seller to know; desperate people can take irrational actions. I do not want to explain I am splitting anything I earn with someone else; it is outside the scope of the transaction. On the other hand, double-close becomes expensive. 3rd option is a bridge loan for the A-B-C transaction. I have done assignment of contracts, and they are a pain. Feet moving parts, fewer people get irked.
Who does BLIND HUDs in the Dallas/Fort Worth area?
Ayesha
First, you need to get the contract turned in to an ATTORNEY who does real estate closings. Forget about working with a title company. The attorney is much more affordable and will do a double closing with only one side of the transaction showing on the HUD-1
The attorney needs to do a complete title report. There could be other liens hiding that you have not discovered or that the seller did not tell you about.
Is the house currently occupied by Section 8 tenants?
If it’s been 4 years without paying property taxes, it may have already been posted for tax sale. You need to go to the court house in the county where this property is located to find out. Just because the seller says they did not get a notice does not mean it was not sent out.
Your asking price is way too high I think. I know you want to pay the back taxes ( which could have penalities and interest and be more than you think) plus make a profit. But I can’t imagine that any investor who knows what they are doing would pay that much for a house in the condition you mentioned.
Contact the hard money lenders in that area to find a buyer. But your price needs to come way down to make it work.
Would it be safe to say Ayesha is better off walking from the deal? As you mentioned Jackie there could be interest, penalties, and additional liens against the property bringing the total debt owned up. Before we can create any offers don’t we also need to know what the repair costs would be? Also, why does almost everyone calculate and negotiate based off ARV? Seems to me like that is a could’ve, should’ve, would’ve number to use with SELLERS. We need to replace the ARV with the AS-IS value and go down from there. When you turn around and sell to a BUYER then you can whip out your ARV values. Just a thought.
Rafael
It is not necessary to walk from this deal but the numbers will not work the way she has it structured now.
You need to know ARV to determine the “as is” value. You take ARV then back out the repair costs, then back out any taxes due or liens, then back out the profit you’d like to make. The number that is left is the maximum you can pay the seller.
But it’s better to not make offers based on this number, it is much better to ask the seller ” if I could pay you cash and close within 30 days, what’s the least you’d take?” You still need to know what the maximum price is that you could pay but the seller does not need to be told that number.
Foundation repairs are normal in Texas and it can get expensive. A double shaft pier is about $1000 each. If the house needs them all around, you’re looking at $15,000 to $20,000 just for foundation repairs alone. Not knowing how many piers this house would need, I’m guesstimating that the repairs would be $20k to $25k on the low side.
So, if the house is worth $78,000 – $25,000 in repairs – $15,000 in Taxes – $5,000 profit = $32,000 maximum price you could pay. But you need to leave some wiggle room in the offer so I’d say $28,000 is the absolute maximum that could be paid… and that leaves no payment to the seller. If the seller wants $5k, then your maximum offer would be $23,000.
This is why I say the numbers just don’t work on this one.
A buyer would have a hard time getting financing for this house unless they have some skin in the game.
Hi Ayesha,
I just closed a deal like this last week.
Had an Option for $35k, had my title company (title company works best for me in Nebraska) check title to ensure I knew what we were working with, marketed the house and found a buyer for a mid $50k price, then had the title company do a double closing so the seller / buyer didn’t see each others numbers.
Doing a double closing does add more expense (in this case approximately $500) but its worth it to me so that my seller/buyer does not see the spread. If the spread were a small amount, I would just do one closing.
Doing a double closing is the only way I know of (in my markets) to keep the seller/buyer from seeing each others numbers.
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