All Forum Posts by: Alfred Bell

Marc:
I hear you. Thanks for the input.

I think I might have a breakthrough or solution for all of this. Working on it right now. Conferring with my money partner. Just waiting for his answers (he can be slow on email and returning calls). I'll get back to you shortly.

Marc:
I've got some things I need to take care of this morning, but here are some quick answers to your questions...

The complex is not FHA approved. There is a chance of a Freddie or Fannie loan, especially if there is a high DP. All the lenders said that a buyer for this condo would most likely have to go conventional.

I checked with HOA yesterday on this. There is no HOA certificate. They don't issue them. They just fill out a questionnaire form that a lender sends them for all of that info and they charge $100-150 for doing it.

I can't answer most of these questions as this data has to be current and come from the HOA (how many owner/occupied? how many second homes? how many rentals? how many for sale? etc.).

I can tell you that there are 44 units (8 of them are larger units with a front and back entrance, I have one of the 8). And the HOA is off-site. This condo, and some are, is NOT on indian land (in which you don't own the dirt but lease it). Per last HOA report there is no litigation, debt or trouble. Normally, condos rarely come available in this complex (especially the 8 larger ones) but I've been told that there are a few of the smaller condos up for sale now.

This is not a non-warranted condo. It could be sold through a lender. They would just have to go through the normal due diligence that they do on condos to ensure it isn't a non-warranted condo (law suits, debt, foreclosure, indian land, etc.)

We have about 270k into this project (200k purchase, 70k remodel and holding costs).

A very experienced realtor friend who lives in the complex said that I could probably rent it for $1400/month (and apparently rents are going up). Not sure of the rental demand at this time (I've had about 5 people call me that were interested in leasing a place but of course I told them the condo was for sale only).

The last BPO I received on the property was general, stating a range of 240-280k, and stating that being brand new and remodeled and in a great location would most likely put me at the top of that range.

We started out asking 350k and then made price reductions over the last 5 months. 339.5K, 329.5k, 319.5k, 299.5k and now we have it at "290k, Owner Financing Considered".

Now that I see how complicated owner financing is and that I'd have to use a licensed originator, etc. I don't really see this as being "a desireable, no bank qualifying situation" for a buyer. It appears they'd have to jump through the same hoops with me that they would with a bank. Don't see much of a difference other than I'd be the bank now.

Yes, I agree... an all cash buyer without realtor representation is the ideal scene.

Marc: Is this enough data for you or should I call more lenders?

I'm calling local lenders now for data. Lots of disconnected numbers (guess a lot of small lenders have gone out of biz).

Marc: Here is what I've got so far. The Franklin guy had fast answers and was very certain.

Mission Hills Mortgage:
Must have the HOA Certification. Today condos are super duper complex and there is a lot of data that must be known to work out a loan (how many units, how many are owner/occupied, how many are rentals, how many are second homes, is HOA off or on site, et. Etc. Can do conven or FHA loan. FHA little easier 3.5% down (.5% DP if qualify for First Time Homeowner Pgm). If the condo is already FHA approved it makes it easier. 51% must be owner occupied. If less than 640+ FICO borrower would need a bigger DP.

Franklin Loan Center:
Preferred lender for 3 of the big 4 realty companies (Windemere, Keller Williams and HK Lane). This guy is the high producer of Franklin and seems to be on top of things. He told me that my condo complex is not FHA approved so an FHA loan won't happen. Borrower is going to need 20% DP (a 10% is slightly possible if for a primary residence, but most mortgage companies are not hot on 10% DP on Calif condos now so would be very difficult and not too realistic). Borrower can get a 5, 10, 20, 30 year adjust or fixed, whatever they want as long as they can put 20% down. We're back to 1980 lending guidelines. For a condo like mine selling for 290k borrower would need a minimum of 40k annual income to qualify, and a higher income if they have debt (car loans, credit card loans, etc.). Need 2 years of tax returns, 2 years of bank statements, they must have INCOME (being a millionaire with high net worth and assets doesn't matter), if self-employed will have a very hard time getting a loan. There is also a condo approval process needed (checking the CCRs for any problems, etc.) Great time to buy if you can qualify cuz rates are the lowest they've ever been (3.875% for 30 yr fixed, 3.125% for 15 yr fixed) and will probably go lower. Don't be impressed by a buyer with a BofA letter of approval… BofA is taking over 90 days to close loans and their preapp means zero. Your buyer could fall out of escrow.

Dion: Thanks for the data and opinions. Don't know where you got that condo isn't finished. It was totally remodeled, is beautiful, vacant and ready for move in.

Marc: I'll approach the LO's as you've suggested.

I have a couple other questions on my mind as a result of going through this thread if you'd be so kind.

1.
You suggested a lender's title policy. Please tell me what this is, what it covers and why it is needed?
2.
You said if Mr. Condo Buyer comes with an agent then he is not my buyer. Please explain why. (Of course I'd like a completely non-realtor transaction requiring no commissions, but, if an agent brings a qualified buyer and the offer price is acceptable, even though I will need to pay a 3% commission, I'll have been able to get out of the condo. Am I missing something.)
3.
You suggested advertising, a banner, etc. and only having one showing so as to create activity and competition. Unfortunately the HOA won't allow banners. Only allows one small For Sale sign. All I can think of is put it up on FSBO sites (already done, no responses)... put it on CraigsList (already done, no responses except from realtors who want my listing)... pass out flyers to all tenants and neighboring area (already done and HOA said I can't do it at the complex anymore)... put an ad in the paper... attach "Owner May Finance" sign to existing sale sign. Don't know how else to get the word out. Any other suggestions?
4.
The season is over at this time of the year (all the Canadians and other snowbirds have left and won't return until Oct or Nov). It becomes as dead as a ghost town down there now, temperature gets up to 120+ degrees during the Summer. I don't expect that I will get any decent flow towards the condo to create any competition, etc. My question is... I've lost so much time as it is, should I really let 1-2 weeks go by trying to amass a few "non-agent represented" buyers to attend one showing or should I also go back up on the MLS through my flat fee broker (adding "owner financing") and take the risk of a 3% commission payout in order to get as much exposure as possible in this off season and create the best possible chance of getting a sale?

Marc: Please respond to the two questions in my 5:42 posting when you can. Thanx, Alfred

Couple questions...

Marc: You suggest a fully amortized loan and no balloon. Please explain how this would work and why. I thought a balloon would have to be a necessary feature so as to benefit my money partner for as long as he holds note or to benefit him (and the investor who buys it) when he sells the note.

Marc: There has been a debate about using a licensed loan originator versus doing it myself or via escrow officer or via a title company. I think Bill Gulley's input regarding this has been good. There may never be a problem doing it without a licensed mortgage originator, BUT... that there is a possibility that there could be a future problem is enough of a reason to approach this prudently (for my money partner's sake).

It would be best to be able to show a future note buyer that the note was legally originated and underwritten per Calif law. Best to have this in case the condo buyer/borrower defaults and then seeks an attorney to help him get out of the mess. Best because the laws and requirements could change over the coming years and queer the note.
So I should pay the extra money and time in order to get the seal of a LMO so my money partner can be safe rather than sorry.

Do you agree?

Been thinking about this throughout the week. To get out from under this condo it appears that I basically have 3 options...

1) Sell it with owner financing; 2) do a lease/option; 3) rent it.

I guess there is a 4th option of just selling it off at a very low bargain price and being done with it (but this wouldn't be in my money partner's best interest so not gonna go there).

I think the best thing I can do for my money partner is to sell it with owner financing because: 1) if he holds the note for 2-3 years the interest he receives will allow him to recoup his loss from the sale of the condo (and from the later sale of the note at a discounted price); 2) he can hold the note for a longer period as a solid investment if he wants to; 3) by selling now he won't have the hassles or exposure to liability that comes with owning real estate, he'll just have a valuable note that he can keep or sell.

Do you agree with my logic?

Marc: I left off where I was supposed to contact local lenders to determine loan requirements for a condo buy. Will start that today (too bad it is end of the week and a 3 day holiday weekend).

Going to make some additional posts now as well.