madugo
New Poster
Cash: $ 0.45
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Joined: 14 Jul 2009
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hi, i am talking a deal on selling my motel. the buyer wants me to owner financing half of the selling price, on a balloon loan, which the whole loan amount is due in 5 years, and each month he will pay me the interest only. however, i will be the second lien holder. which he will borrow from bank to get a loan for more than the price i am selling for. that is because he is going to borrow money from the bank to fix up the place too. then the bank will give a check of half of my selling price to title company, then title company will use that money to pay for the loan i own now, and then i will get the difference, which will be around 20% of how much i am selling for. my question is does it sounds right if he is borrowing from the bank for a amount greater than the amount i am selling the motel to him for? the loan he borrows from the bank will be more in period of more than 25 years, which my balloon loan is only 5. would it be putting me on a unsecured position as a second lien holder?? i mean if he can't pay the loan to me in five year, than what is the chance on getting my money back?
thanks.
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Tue Jul 14, 2009 5:22 am |
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No-Brainer
Senior Member
Cash: $ 83.45
Posts: 986
Joined: 29 Dec 2005
Location: Oregon USA
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If you take this deal you are shouldering ALL the risk and I would NEVER do that. The only thing that is saving me right now on a business property that's going into foreclosure is that I have First Position, or I would be up the creek. The guy that holds the second for improvements is going to be left holding an empty bag six months from now when it's possibly over. In the meantime cash flow is zip and delinquent taxes are still accruing along with attorney fees at $360 an hour. I will probably never recover them even though it's in the contract. You can't get blood from a rock.
I sold the business part when I first retired and even with a lawyers drawing up the papers I lost $50,0000 before I could get the courts to get it back so I could sell it again and that took 2 years.
Selling a business is WIDE OPEN to problems, much more than residential property. The new owner can drain it and trash your reputation before you can do a thing. It took me years to recover as much as we did and never did regain our old market position back.
Just be careful and expect the worst. At least get full financial reports and credit reports on your buyer. I failed to do that and I am sorry now.
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Wed Jul 15, 2009 2:02 am |
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madugo
New Poster
Cash: $ 0.45
Posts: 2
Joined: 14 Jul 2009
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it just seems like i will have to wait for another buyer..
i asked a few more people, all the answers are the same...too risky...
and people even telling me that the buyer does not want the property, but to just use my equity to borrow loans from bank that i will never have any control off..
so..the deal is certainly a No now..
thanks all for the great suggestions...
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Wed Jul 15, 2009 3:22 am |
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