80% LTV with “fake” purchase price – ?????

[Anonymous]

I would agree the advice to not use this mortgage broker. If you financed the 80% and the seller held a note for the 20%, that is still 100% financing.

A better way would be to have the seller sell the property at full appraised value and “gift” you the 20% equity. You will still be paying property taxes at the higher market value. The gift equity scenario is legal because it is fully disclosed to the lender through escrow.

[23109VC]

assuming I did it THAT way – with the seller “gifting” me the equity… would that open the door to only do an 80% first and avoid the 100% financing rates?

i am basically seeing that if I do an 80% loan…I am looking at 6% or so.

if I go 80/20… it’s more like 6.75% for the first, and roughly 9% or more on the second. using this method, it’s way too expensive..and it makes no sense to buy.

the 80% first brings carrying costs almost in line with rental costs….

we spent the day looking at homes up here in Temecula. We looked in Murrieta too. thre i a new development in Murrieta by Lennar called Spencer’s crossing. Nice. they had a beautiful 1 story 2600 sq ft, an EI “everything’s included” plan…fully upgraded, even appliances..for $440k.

not bad. just an interesting note. as I was speaking to the agent in the Lenna prpoerty..she asked the usual BS questions about what do you like, where do you live now, when would you want to move, etc. I candidly told her I live in another Lennar property in Temcula, and am renting, but am possibly buying from the owner. she asked which one, and she knew the prpoerty – she had worked there. knew the floorplan..etc. she asked what it was offered to me at..probably hoping to tellme what a better deal SHE had there. when i told her $350k, she gasped…and said..”what?” i told her 350 and she said, i’d love to sell you one of mine but if i were you, i’d buy that for that price..not mine.

how often do you see a realtor tell you to buy from the OTHER guy??? not that she is the expert..she’s a realtor…but at least in terms of relative current pricing..i’m pretty convinced the 350k is a good deal.

it’s only NOT a good deal if you expect more drops coming..substantial drops.

geez..i wish i had a crystal ball.

are the nicer parts of temecula, and murrieta, going to fall THAT low? take Greer Ranch..where there are 800-900k homes…the averagte home up there is probably 600-750k…. or most of Harveston..which is in the 400-800s…. are these thigns going to fall 50% and be 200-400?

if only i knew….

i’m torn between holding out for a better deal, and feeling like i let a good deal get away from me.

[SD Realtor]

23 –

If you are so torn why don’t you ask the owner to carry 100% of the paper on the home, structure a loan at a fixed rate you both agree to and move ahead in that manner?

You see that the main problem with this home, or with any other home that you are looking at has to do with your financing cost correct? That should be telling you something. The fact that you have to finance 100% of the transaction is going to cost you no matter where you buy or who you buy from if you are going to use conventional means.

Also what that other agent was telling you made sense… FOR NOW… Of course she has no other listings that are at that price. As you have seen on the board here, nobody is doubting that this is a good deal for the here and now. However many of us believe this sort of pricing will be more prevalent in the future.

SD Realtor

[no_such_reality]

Why is the owner giving you a $100K freebie?

Fraud, end of discussion.

[TemekuT]

Gifting is a bad idea for the donor and here’s why:

In 2007 an individual may gift $12,000 annually to others without having to file a gift tax return. So assuming both buyer and buyer’s wife are gifted $80,000, $24,000 is the gift ceiling and the donor (seller) has to report a gift of $56,000 to the IRS in 2007. That’s o.k. now, except – that $56,000 eats into the seller’s eventual (at death) exclusion from estate tax. This exclusion is called the Unified Credit and you can read about it in IRS Pub. 950. So, assuming the seller dies with an estate, then $56,000 of that estate that should have been free from estate tax will now be subject to estate tax. Why in the world would the seller want to give a gift to a stranger that would eat into their Unified Credit?

[gn]

23109VC,

Maybe you should change your handle to “KnifeCatcher” b/c that’s what you have been tempted to do 🙂

“catch the falling knife”

[Anonymous]

Good point, TemekuT.

It is the seller that would be responsible for any taxes. Perhaps unloading the property now and gifting the equity to a buyer is less financially painful than any other option. It is hard to say without knowing the seller’s financial situation.

In any case, the buyer in this scenario would not pay taxes on the gift equity, and would receive a more favorable interest rate on their mortgage.

Here is a link to the IRS publication for gifts:

http://www.irs.gov/pub/irs-pdf/p950.pdf

[Author]

Posts