If I were approaching this deal I would take note of what the seller is telling you that is your gold.
She wants to get rid of the expenses of maintaining the property, taxes and providing a roof over her sons head. She is on a fixed income so that is her WHY. She does not have spare income and will need to return to the workforce to get it. Those are some pretty powerful motivators.
I'd say your strongest offer is one that will both pay off the existing $18k in debt or get rid of her obligation to pay it by doing a "subject to" or Lease Option. The other factor is she is really motivated by "INCOME". So if you offered to pay her a note with interest for the remainder of your purchase price that would really motivate her to accept your offer.
So the offer would depend on your ability to pay the 18k in my opinion.
Option 1:
Lets say you do have the ability to pay the 18k and run with that scenario based on the above mentioned assumptions.
Value = 135k
Lets say you negotiate a 40% discount for a quick sale.
Purchase price = $81,000
Down Payment = $18,000
Seller Financing = $63,000
Term - 30 yr
Rate = 4% (Negotiable)
Payments to Seller = $300.77 / Month or $3609.24 / Yr
That would be a decent increase to a fixed income. She would collect $108,277.20 over the life of the note.
Option 2:
Lets say you do not have the 18k on hand to do the deal.
Value = 135k
Negotiate 40% discount. Purchase with a "subject to" strategy.
Purchase price $81,000
Down Payment = $0
Seller Financing $81,000
Term - 30 yr
Rate - 4%
Payments to seller = $386.70 / Month or $4640.40 / Yr
You pay the note on the 18k Mortgage out of your cashflow. Seller would be in a second position with her note. You will also run the risk of the "due on sale" clause being triggered.
She would collect $139,212 over the life of the note. NOTE this is more than the $135k the property is worth but she would be collecting every penny and more over the term of the note.
With that being said those are 2 valid options and they can be played with or tweaked to provide the perfect deal.
For Example:
If she comes back and says the 18k has to be paid off and is not willing to risk her credit being damaged and trust you to pay the mortgage on time go with Option 1.
If she says she wants to increase her income by $500 per month and that $300 and change will not cut it. Adjust your financing a bit like so. We'll use Option 2 math its a big easier to explain.
Use a financial calculator to solve for the missing variable. Adjust either Term or Interest. We know:
Value - $81k
Term - ??
PMT - $500
Rate - 4%
Calculated Term now = 19.44 Years
We round this to 18 Years for good even time frame and recalculate for payment.
PMT = $526.66
More than what she is asking... It's good to over deliver, it makes your offer that much stronger.
New Terms:
Sales Price $81,000
Term 18 years
PMT $526.66 / Month or $6319.92 / Yr.
She would collect $113,758.56 over the life of the loan.
There are all sorts of ways you can cut this deal. You have to keep in mind that if your going to be holding the property then obviously whatever you can rent it for will dictate how much you can afford to pay her monthly out of that rent just as if it was a traditional mortgage.
Cheers,
Hopefully this will give you some creative ideas to try. I really thing the main motivating factor that will get you the deal is how much "INCOME" you can provide for her.
Another option may be Interest only payments.
Another option may be straight principal no interest.
Endless options.
