If the seller of this house is not requiring a down payment and you can get him to sell for market value or below, then I would proceed with the purchase, because without a down payment, you are controlling a property for nothing more than a monthly payment which of course is what is known as good leverage! Do not pay a premium on the price, and do not allow him to charge any more than around 6%-7%, Other than very high risk investments, the seller cannot find any other place to put his money today that will pay him 6%-7%. Therefore, this would be a good deal for you and him. The seller will do very well on this deal, because if you look at an amortization table, you will see that by the end of the 5 year balloon period, the principal payment due will be very close to the original price paid for the property. In essence, this could be a good deal for both parties, as long as you are not paying above market value. Make sure you have an attorney create the documents and have it recorded.
Here is a summary of all activity in Kingstree from the last 12 months. http://goo.gl/gvxKv and details of the same properties http://goo.gl/hB8kl An appraiser would likely pull comparable sales from these homes. I have seen distressed sales used as comparable sales. Not all appraisals are equal, and not all appraisers will choose the same comparable properties to establish value. Whomever is in disagreement with the value should get an appraisal. If you both disagree on value, maybe you split the cost. (I can recommend someone who will get it right) If you appreciate an answer, please give thumbs up. For the most helpful answer, please say thanks with a best answer click.
You, amerjan, should just go out and get a regular loan. Even if you had to pay PMI, rates are incredibly low.
Coldwell Banker United, REALTORS
A traditional FNMA loan could require you to verify 6 months reserves for all properties as well as verification of LTVs with appraisals on each property.
Without know the cost of the property and the value of any others you own there's no real way to quantify the premium.
In my opinion, Interest rates aren't going any lower and if you want to build or expand your business and portfolio now- I recommend restructuring or consolidating so that you can lock in the best long term rates before you expand and grow. Stepping outside of the "marketable" financing options is too risky and you can ruin your future easily if you get into a bind which could be right around the corner if you don't have enough reserves.
There will be plenty of great deals in NC for years to come.
Thanks for your feedback. Let me just add his - I do have excellent credit but my I do not have the typical 25%- 30% that traditional lenders want. Additionally, the approval process is extremely frustrating and time consuming.
I was attracted to this property because of the location etc., plus it already has a tenant, the loan will be a 5 year balloon using 30 year amortization. The lender that I typically work with has a limit on the number of bank financed properties that a borrower can have and it seems I'm approaching that limit. This would allow me to purchase the property and not have it counted towards that limit. If this all makes sense....
I'd limit my offer to appraised value at the most.