Using land contract to buy from seller who is upside down, or has captial gains....

[Rohit Jindal]

Hi All:

I want to validate the following:

If I use a land contract to buy a house, with Subject To existing financing, from the seller, and the seller is upside down, meaning he owes more than the current appraise value of the house, would you recommend financing the negative equity for the seller, for a low interest rate, to pay off in say a year? What other costs do you expect in this scenario for the seller or myself, the buyer, to pay?

Second, if the seller bought the same house, for example, for 100K, 10 years back, and than the market value went up to 200K, and he took a LOC for 70K, netting his current outstanding debt of 170K, if I utilize a land contract to purchase the house from him, will he still be subject to pay for capital gains on the 100K, if the current market value is 200K? I presume yes, but just validating with the experts!

Thanks in advance!

[Wayne Brooks]

You expect the owner to pay you for the negative equity?

Value has nothing to do with cap gains, only his basis, adjusted for capital iimprovements and depreciation,verses proceeds received from the sale.