AFS Purchase

[smmcguire]

Hello Quick Turn members

I'm looking for some advice from Alberta members on a purchase I want to do.

House with ARV of 215 K. Prof. appraised at 215 K for the bank

Can purchace with AFS for 170 K . Seller(Scott) needs quick sale to be able to move to B.C.

The home was sold to my seller by original owner(Gabe) via owner financing. A mortgage for 120 K was created 5 years ago. Gabe owned it free and clear at time of sale.

Now 80 K owed to gabe

Monthly payment 945./mo. (5.25 % until 2021 no early payout penalties)

Taxes 225./mo

Has a legal 2 bed, suite 750./ mo.

Prof. appraised at 215 K

My cost is 170 K

Internally it requires updating, has older kitchen and bath from eighties.

House are selling for between 225 (older 3 bed -2 bath houses) to 400 K (new bigger houses) in area. Developing alot of 3 and 4 bedroom large sq. ft homes.



Seller (scott) is behind 6500. in property taxes, but city has not yet filed this against title. I pulled title

Loc. Ottawa



My ques is how would you proceed with purchase contract and how can I incorporate the existing mortgage?.

Would you build in discount as Ron L. says for early sale?

What about capturing mortgae paydown over the period I RTO property. -Use a cash on closing clause?

Any other comments including anything to mention to Lawyer (knows AFS procedure) to ensure all bases are covered.

This is my first Quick turn purchase.

Could you cover a play by play account of your ideas.



Thanks

Steve

 

[neill]

Hi Steve - need more info here I think - my first question is - is seller Scott willing to leave his 90k (less taxes owed) equity sitting in the property?



As far as mortgage paydown, you can def build that in that it is to your benefit as purchaser.



Also, is the appraisal recent and did you have it done?





Thanks

 

[smmcguire]

Hello Neill

I thought I covered everything, but like a guy I missed some points



Yes, he will leave the equity in the home until payout (when house sells to RTO T/B)

He needs 10-15K for move to BC

Appraisal done by Appraiser I use, buy was hired by seller (scott)

completed 3 weeks ago.

What subject to... clauses for this deal would you use.



My thought is

AFS

Fixed cash sch'd

Inspection

taxes paid by seller

Is there any other details to cover?



*How would you detail equity payout at future date?

*What comments need to be made in regards to mortgage held by former owner Gabe?



Thanks

Steve

 

[Thomas Beyer]

[quote user=smmcguire]AFS

Fixed cash sch'd

Inspection

taxes paid by seller

Is there any other details to cover?


make sure YOU pay taxes and mortgage after deal is closed so YOU control payment flow.



If seller pays taxes and needs 10-15K you need to offer him 20K cash or so ! Why not get a brand new 80% mortgage with 34K cash buying it for 170K ?



Line up AfS with 1st mortgage date .. when is it due ?

 

[smmcguire]

Any of the quick turns like Neill, David S.(Calgary), Jim W.(Edmonton) , or Andrea (Red deer) have any comments it would be greatly appreciated.



I am not in the position for more mortgages as I have enough lenders riding me like a race car without brakes. All over me like hair on a Gorilla or Ugly on an Ape ! I think you get the picture.

 

[Thomas Beyer]

Every asset comes with a liability in terms of $s, time, risk, responsibility, obligations ...

Ensure that assets have enough income/cash-flow and that liabilities are appropriate in light of asset values !!

 

[lanedry77]

Hi Steve,



As I see it, one of the big challenges here is that the existing mortgage is not by some huge bank with thousands of employees, but rather it's an individual.



Scott may be OK leaving the loan in place, but Gabe might cry foul.



If Gabe isn't cooperative, having Scott re-finance the property through a bank and then letting you take over *that* mortgage would be the best way.



80% of the $215k appraisal is $172k - meaning you could pay out the sellers equity entirely, and not owe him any more money in the future.



either way, you would want to buy on an agreement for sale. the AFS contract will determin who benefits from the paydown (it should be you), and how much and when you own any equity to the seller, and at what interest (it should be zero).



... building in a discount to the AFS is unlikely, as it's unlikely any lawyer would endorse that for the seller.







Thanks,



David.

 

[AndreaW]

Steve,



I agree with David Sandbrand, you need to talk with Gabe and see if he is interested in continuing on. If Gabe is on board, then use the AREA contract with an extra page to cover off the financing details (you can email me for a sample copy of how to fill in the contract and my extra page which I call schedule A). The lawyer can draw up a formal agreement for sale doc (similar to what a bank mortgage says, but shorter). Your lawyer should also do a statement of adjustments to account for taxes - now if you are paying back taxes as part of the deal, that's fine just make sure you give the money to your lawyer to pay the taxes, not the seller.



You can try to build in a discount if you want, but I make sure that I'm buying the property at a discount to begin with - purchase price wise.



The mortgage pay down benefit is covered in my schedule A.



My email is [email protected]