QUOTE (tonypeters @ Jan 25 2010, 07:26 PM) Joel,
I remember you sharing this deal with me when we met in Calgary. Based on what I already know of the vendors underlying motivation and personal situation, I really don`t see how you could possibly make this one work.
Remember what I said:
You should NEVER want to purchase a house MORE than somebody wants to sell you their house! If you do, you stand a very good chance of inheriting their problems! As a "sophisticated" real estate investor you have the unique ability to "solve peoples seemingly impossible problems", but only if you can create a Win, Win for everybody involved!
Please don`t take my comments the wrong way, as they are not intended to offend, but in my opinion the only Win, Win in this deal is...Seller Wins, Seller Wins!
The fact of the matter is, the house is upside-down from a mortgage/market value perspective.
You mentioned that Genworth is willing to pay out TD and set-up a structured "payment plan" with the vendor, right? As it sits right now, the mortgage company has their equitable and beneficial interests protected as they have first charge on title. So my question to you is this; are they willing to accept a purchase price (from you) of $335k? I am not sure why they would, but if they are willing to do this...GREAT!
Now assuming they go along with this, are they also agreeing to provide you with clear title when you close? And with "no strings attached"?
If they are, it looks like (as long as you have performed all of your due-diligence) you can pick this house up under market value. If this is the case, I am not sure where the Vendor fits in here? While I strongly promote a Win, Win for all stakeholders involved in a transaction, I am not quite sure WHY you would agree to allow them to benefit from any future equity appreciation over the period of time you hold the property. After all, you will be taking on plenty of "risk" yourself with respect to future market conditions, as there are absolutely NO guarantees which way things could go. Please do not get me wrong, as I do agree that the "fundamentals" do look promising, but the fact of the matter is...there are NO GUARANTEES!
The company I mentioned to you is called "Debtor Advisory Canada". A fellow REIN member along with his brother operate the businesses out of Calgary and Vancouver. The Calgary (REIN) member`s name is Brian Zerff. I do not have his phone number, but I do have his brothers. You can contact David @ 1 (604) 325-5534.
If I am missing something here please let me know, but based on what I see on the surface, I would not touch this deal!
I hope my feedback is of assistance to you?
P.S. another tip when dealing with people that are in financial trouble; NEVER cross the (this is what I would recommend you do) advice line! Let the professionals do that.
I totally appreciate your input Tony, I thought this deal was interesting, after talking with Genworth, they understand what im trying to accomplish and like the idea, but they could not put it in writing, only verbal to offer the same deal with the home owners after the sale of the house 2-3 years down the road; reason being, What if the owner racked up a bunch of debt and reduce their ability to repay the debt with genworth. I found it very interesting when talking with genworth how flexible they were willing to go. This what I have come up with as a simple solution. Hand over my tenant buyer and help them with the agreements (thanks Barry) and use the option money as my finders fee. Now the Mort is being paid, equity will build and the owners will not have to pay me my 25k spread plus equity. So in the end after two years the debt should be wiped out. I`ll get a great testimonial, the tenant buyer loves the house, and the home owners save their credit and wipe their debt......and I`ll make some money win win
