Buyer Found At Open House

[Bobby Holley]

My wife and I recently showed up at an open house the same time as another family.  I found out that the family loves the neighborhood and they love the schools that feed that neighborhood.  Their purchasing budget is $280k - $300k.  The comps in the area range from $220k - $280k.

I have a friend in the same neighborhood who needs to relocate to Charleston, SC because of his job.  He is already working and living in Charleston and his wife is trying to sell the home, preferably by June.  They want to sell the home AS IS because they don't have enough time or cash to do what's necessary (and they want to keep the agent commissions to themselves).  Their AS IS asking price is $200k.  We estimate they would have to spend more than $30k on renovations to make it an attractive purchase on the retail market.  They currently owe less than $120k on the mortgage.

My goal is to buy the house from them while simultaneously receiving a bank approval letter from the aforementioned prospective buyer on a purchase price that meets their budget and our desired return.

I want to avoid going the hard money route. Right now I have been approved for a HELOC that would provide about $24k for a downpayment which means I would need to finance an 85/15 LTV just to get a $160k loan. My ideal scenario RIGHT NOW would be to offer $160k to the seller, offer the prospective buyer $30k - $40k in renovations of their choosing in exchange for a purchase price of $260k.

Any creative thoughts on this deal, financing, etc I would love to hear them.  Thanks.

[Wayne Brooks]

First, I guess they're not really friends, or you' just put the two together.  You also don't have the financing to buy it as a non owner occupant, you don't have the money for the renovations, a buyer is highly unlikely to commit before they see the finished product, and their financing may fall through.

[Troy Gandee]

Hey @Bobby HolleyHmm... That's a tough one, man. I recently had a confusing one similar to this. I had a rehab listed and a neighbor called to ask if I would want to buy her house because she wanted to be in a better house. Fortunately, the comps were starting to creep upward, so I was able to buy her out of her mortgage and only had to put around 5k into the house. It's under contract now in and I should make a little something. The whole project only took 4 months. I was then able to help the seller find another house and represent her as her buyer's agent. It worked out pretty well. I wouldn't go the hard money route, either but you may be able to get a bridge/transactional loan if the timing is short enough. The interest can be pretty brutal, though. You should touch your sphere of influence and see if maybe you can get your hands on some private money with a fair return to your lender. You probably know someone with a retirement account that they may be willing to tap if you secure them with a mortgage. There is going to be a whole lot of moving parts here and things could go sideways quickly. If your friends in Charleston are interested in buying, I would be happy to reach out to them. Maybe looking at properties here would motivate them on the selling side.