My Second Deal

Actually, I would consider this my first real collaboration, mainly because I got to talk directly with the seller on the phone, but still no deal (yet?). Here's the story ...

I was perusing an online web site catoring to FSBO's in my area. I came across a 3/2 house in an older neighborhood (1960's - 1970's) that was listed for $96k. I did some searching, and found the owner lived in Iowa. I thought she either moved and the house is empty, or she is renting it out. I found out the house was appraised last year for $110k. While I understand assessed values are meaningless, they do give a ballpark figure.

Interestingly enough, I told my wife about the house, and she suggested we go out and look at it (as well as some others I found). Needless to say, I was a little shocked. It seems she is starting to come around with my interest in REI. Maybe not as excited as I am about it, but at least I am not getting beaten down like before. Yippie!

So, we went to see the house. Sure enough it was empty. And from its appearance (old literature at the front door, unkept lawn, and so on), it appears it had been vacant for a while. I peeked in a couple of the windows, and the inside looked in very good condition. I thought it was strange there was no "For Sale" sign in the front yard, though. I jotted down some notes, and went to look at the other houses on my list.

When I got home, I looked up the property again to get the contact number. I wrote down some questions to ask beforehand, and dialed the local number. I figured since the owner is in Iowa, the local number is probably a relative of hers. A lady answered, and I told her my name and that my wife and I saw the house in the listing. I then asked if she had time to talk about it. She said I caught her in the middle of dinner, and she would like to call me back when done. I apologized, and told her I would call her back in one hour.

An hour went by, and I called her back. I apologized for calling her at a bad time earlier, and proceded to ask her some questions about the house. It turns out it is her sister's house. she said her sister got a job in Iowa and had to move. She had been trying to sell the house for a while now (she didn't say how long), and there had been several offers, but nothing developed. I asked if there were any problems (physical as well as financial) about the house. She said 'no', and that the house has new carpet, new paint, new crown molding, and some other new things. I told her $96k was a little out of our price range, and if her sister would be willing to go down in price. She said she doubted it as the house was already 'a steal'. I asked if her sister would consider carrying-back all or some of the financing, and she said she doubted it, but wasn't completed sure if her sister would be totally against it.

At this point, it sounded as if the property was not a candidate. The biggest problem was that I was talking to a relative and not the owner directly. I think I'll make a LD phone call to the owner this week and see if I may be able to get the price down, however ...

After the phone call, I did some more researching on the county clerk's office web site. I did a search on the owner's name through all documents from 1980 until now. Only one document came up and it was a Warranty Deed signed by the owner. She bought the property in 2000 with two mortgages. The first was for $78.4k and the second was for $14.8k. I ran some amortization calculations, and the balance on the loans today would be roughly $89k at worse. Kind of tight for a first deal. Of course, if the owner had paid it down more, it may very well be a good candidate.

The sixth sense I am getting from the owner's sister is that the owner appears not to be extremely motivated to sell. First, the sister said they had other offers that never came to fruition. Second, she seemed to feel the owner would be reluctant to lower the price and/or carry-back any financing. Again, I need to talk to the owner directly to get a better feel for the situation, though.

I am going to run some comps today (if I can), and call the owner directly with an offer. I figure the worse thing that can happen is I'll get a 'no'.

Wish me luck!