I want to run this by the forum to see if there are any potential flaws in this proposed deal structure.
M parents had their 3500 sf house burn down last month in North County. We relocated them to a fully furnished townhome in Carlsbad. While they are still upset about their loss, they really like their new, downsized coastal neighborhood. Since they lost all of their furniture, they are “surviving” in a 1500 sf condo within 1/2 a mile from the water.
The insurance settlement was substantial and they essentially have enough cash to buy 2 of the units in the complex that they are renting.
The builder is still under construction on a different project in the area. They have 20+ in standing inventory with 10+ still in planning.
My parents asked me yesterday if I thought that the builder would consider a 15% discount from the asking price on the best unit in the complex. I told them that would be tough for the builder to accept because as soon as it recorded, it would effectively discount all of the other units.
Here is our idea. My parents understand that the market is still correcting and will be for a while. They also understand that renting is the economical thing to do but they also don’t like the idea of having to potentially move every few years.
They want to approach the builder and offer 15%-20% less than asking price. They will pay cash. If the builder can’t do that, they want the builder to take back an adjustable 1st TD for the 15%-20% difference in the price. For example, using round numbers, let’s say the asing price is $700,000. They will offer $560,000 cash and ask the builder to take back an “adjustable” note for $140,000. The property will be appraised in 24 months and the note will be adjusted to the current market price at that time. If the property is worth $700,000 after 24 months, they will payoff the $140,000 note. If the property appraises for $550,000, the note will adjsut downward to $10,000. All interest will accrue and be payable at the end of 24 months. This way, if the builder gets desperate and starts dumping units, the note will adjust downward.
Any potential pitfalls? We know that the price could actually fall below $560,000 in the example above but we are willing to take some risk.
Yeah the pitfall is that prices are going down, just rent. Offer a rent-to-own with the inital price at what the developer is asking, but a very low contract premium. Then your parents can securely rent for several years and walk away when they are ready.
Yeah the pitfall is that prices are going down, just rent. Offer a rent-to-own with the inital price at what the developer is asking, but a very low contract premium. Then your parents can securely rent for several years and walk away when they are ready.
Yeah the pitfall is that prices are going down, just rent. Offer a rent-to-own with the inital price at what the developer is asking, but a very low contract premium. Then your parents can securely rent for several years and walk away when they are ready.
Yeah the pitfall is that prices are going down, just rent. Offer a rent-to-own with the inital price at what the developer is asking, but a very low contract premium. Then your parents can securely rent for several years and walk away when they are ready.
Yeah the pitfall is that prices are going down, just rent. Offer a rent-to-own with the inital price at what the developer is asking, but a very low contract premium. Then your parents can securely rent for several years and walk away when they are ready.
I’ve worked with a ton of builders/developers and I don’t think offering “cash” is going to help you get a better deal (definitely won’t hurt though).
I’ve never heard of a deal like this done with a builder/developer. Once a transaction is closed they want to be done with it.
I HAVE seen alot of deals structured with a “designer credit”; where the $700,000 sales price would stay intact, but the “discount” would be credited to the buyer on the HUD as a design credit.
I’ve worked with a ton of builders/developers and I don’t think offering “cash” is going to help you get a better deal (definitely won’t hurt though).
I’ve never heard of a deal like this done with a builder/developer. Once a transaction is closed they want to be done with it.
I HAVE seen alot of deals structured with a “designer credit”; where the $700,000 sales price would stay intact, but the “discount” would be credited to the buyer on the HUD as a design credit.
I’ve worked with a ton of builders/developers and I don’t think offering “cash” is going to help you get a better deal (definitely won’t hurt though).
I’ve never heard of a deal like this done with a builder/developer. Once a transaction is closed they want to be done with it.
I HAVE seen alot of deals structured with a “designer credit”; where the $700,000 sales price would stay intact, but the “discount” would be credited to the buyer on the HUD as a design credit.
I’ve worked with a ton of builders/developers and I don’t think offering “cash” is going to help you get a better deal (definitely won’t hurt though).
I’ve never heard of a deal like this done with a builder/developer. Once a transaction is closed they want to be done with it.
I HAVE seen alot of deals structured with a “designer credit”; where the $700,000 sales price would stay intact, but the “discount” would be credited to the buyer on the HUD as a design credit.
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