Expert: Jim Root - 2/6/2008

Question
My name is Chris and I recently posted on here a few weeks ago looking for some help with some properties. After looking at the homes and finding the one that fits my goal, I have come across some more questions:

Here is the current Information: 3 bed; 2 bath; Duplex asking 23K; appraised at 43K; 1400sq. ft. Roof is 7 years old (still looks new); Duplex currently is rented-Upstairs (single bath & single room @ 375/month utilities payed by tenant who is occasionally late during the winter due to seasonal work but always catches up, who has been there 10 years. Downstairs-family that has been there 1.5 years, pays 400/month & never been late. Current lease is month to month. House has been on market for 6 months. Not under foreclosure. Ugly looking home in newer neighborhood (only 2 homes on block are in need of repair and one is in the process). Needs all new siding, flooring (carpet, vynal...etc) walls need paint and patching. Basement is dry and strong in terms of support beams & such. Furnace is from the 50's/60's) There is asbestos on the heat pipes and im not sure if I should get an inspection before or after I buy it, or use the inspection contigent on the offer.  I have comps of last 6 months sales in Antigo, WI. Taxes are 1.1K. I have no income or assets (besides my car which isnt payed off) I am a college student, and would manage the property myself.

My goal here is to bring monthly cash flow into my pocket and to let the equity build up in the home. I need help drawing up a deal so that I do not low ball the offer. I listed things that the house needs above. I would like to offer seller financing; if that falls through my grandma would co-sign. Any ideas? Thanks for your time and help!
Chris Jesse  

Answer
CHRIS--

You've obviously done some homework on the property you're interested in purchasing. That's great! One should know as much about a property as is possible before closing into ownership of it!

And it seems you have most of the information/data you need to make an "Informed" Offer--except for a Home Inspection Report, and I'd suggest that any Offer you submit includes an "Acceptable Home Inspection" contingency that allows you to either "walk away" without penalty OR to renegotiate for repairs or price reduction  if the Report shows what you consider to be "major deficiencies."

As for Seller Financing,most Sellers want at least a 10% Downpayment on any sales that have them "carrying the paper." And, if Grandma is willing to be your Co-Borrower and you are gong to live in one of the Dupl.ex's units, an FHA "College Student/Co-Op" Loan (sometimes called a "Kiddie Kondo" Loan) might be available to you for the purchase of this property. Your Offer to purchase should have a Financing Contingency, too! So that if the Seller refuses to "carry paper" for you, and you can't get a mortgage, you can "walk away" without losing any Deposits you've placed with your Offer (And a Deposit will be expected!) Such a Contingency is needed unless, of course, you can obtain a "Firm Commitment" for financing BEFORE you make an Offer!

Yes, you DO need help "drawing up the deal" You need a Realtor working as your "Buyer's Agent," serving YOUR best interests. Using the services of a Professional Realty Specialist will cost you NOTHING, the commission is paid by the Seller! Don't buy directly through the Agent who's "4-Sale" Sign is up in front of the Duplex--he/she works for the Seller, NOT you!

You mentioned "low balling," and I submit that if the property IS actually worth $43,000 as reported in a valid Appraisal, ANYTHING less than the $23,00 asking price would be a "lowball," ESPECIALLY coming from someone asking for Seller Financing because he/she can't get a mortgage due to "no income/no assets' & a "car payment!" There's an old saying in both Real Estate AND Financing, "THE GREATER THE RISK, THE HIGHER THE PRICE!"

I urge you to get an experienced, honest & hard-working Realtor AND a similar kind of Loan Officer "on your Team" right now!( A Loan Officer's paycheck will be on you, but ONLY if he/she can get you the Loan you need!)The 3 of you, together, may be able to make the "Duplex Purchase" happen! Good Luck, Chris!

--JIM