Retiree wants FMV on clear property?

[Tony Johnson]

How do you do deals on a property that has no mortgage (Free & Clear) but the owner wants market value? This is close to the third property where I've been tempted to do the deal as a realtor because there's not much space between the Seller asking price and the Market Value. Any way to do a deal on a property with small %Equity

Case:

Seller asking price: $250k

ARV: $260k

Mortgage: $0 [Owned Free & Clear]

Repairs: Minimal ($5-10k) to put in pristine condition, Property is move-in ready

[Raj Gandhi]

You asked for a creative solution... make a seller financed offer with minimal down payment (5%) and market rate interest (4%).  Structure the terms as interest-only for three years and then a balloon payment.

For three years, rent-out the property.  Because debt service is interest-only, your cash flow will be very good.  Confirm the numbers, but I think you'll easily recoup the 5% down payment.  

Hopefully the property will appreciate 5% per year for three years; if so, it will be worth $290k.  At that point, refi to a conventional mortgage.

If your market doesn't appreciate in three years then you essentially have the opportunity to give the property back to the seller and walk away.  

The point of this solution is to tie-up the property at a fixed price for a future real purchase.  Try to structure the down payment and balloon payment with respect to rent so that you're outlay (risk) is minimized.

A more savvy seller is going to ask for a larger down payment.