F.M. 1937 (Distress property)

F.M. 1937 (Distress property)

(1995) Every few months I would give out one of my "I buy houses" cards to the clerks at a 7-11 store near my house. One day a lady called and said that she had a house for sale for $10,500 dollars. I knew the property. The house on it was in such bad condition I figured the house as a total loss. The value would be in the land. She explained that her father had died leaving her the house with $8,500 in back taxes due. She need to get $2,000 out of the deal so she could not take a penny less then $10,500. I met this lady at the title company 30 minutes later, filled out and signed an offer to buy, and opened the escrow for a cash purchase. The young lady needed $500. that day. The deal was: purchase price $10,000 all cash. Purchased "as is" with $100 in escrow, closing in five days with a check handed to the seller to cover the $500.00 she wanted. Buyer to pay all closing cost.

My risk was that the taxes were more than she said, (I did have the statements she gave me) and if the deal fell apart I would be out the $500.00 I gave her.

I now needed to raise $9,900 plus closing cost of about $300 in five days. First stop was my wife's credit union. I was informed it would take two weeks and cost about $1500 for inspections, appraisals, application fees, etc. I asked if there was any other way of doing this. The loan officer suggested a signature loan for $10,000 at 8% interest, and that would take about thirty minutes. I walked away with the money that I needed and no lien on the property. Because the savings and loan employees have to follow their company's rules, they ended up with an unsecured loan when they could have had a first mortgage lien. This deal still makes me smile at the lunacy of it. The deal closed without a hitch.

Some people I know who heard how much I paid for this property thought I had paid too much. Because I had walked the property, and checked out that leaning old house through all those weeds, I knew some things they did not. The land was 1.5 acres in a wedge shape configuration, with two old oak trees.

For six months I made payments on my loan. One day a man showed up at my home offering to buy the place. I said no, not for sale. He came back every week until I finally offered to it sell to him for $18,000 with 50% down and 14% interest on the balance. He was back the next week with $9,000 and I was out one property.

I made a 40% profit in six months. I had $9,000 cash on hand, with a note payable to me at 14% interest for the balance. I did not have to use any of the sale proceeds to pay my savings and loan as they did not have a lien. The buyer paid me every month for 30 months then re-financed and paid me off.

When those same people who criticized me for buying the place found out what it had been sold for, they said they wanted in on the next deal. I told them I would show them how to find their own deals. Only one person ever took me up on my offer.