Profile picture for ElenaSahagun

buying a fixer property from elderly neighbor

I am looking to purchase a home. We have good credit and qualify for VA loan a side from that we have about $20,000 in savings. The neighbor right next door to my patents, whom I have know for 20+ years is a old vet who lives alone and has no family. His house has gotten pretty run down, last 4th of July party of the old shake roof caught fire, and he is a bit of hoarder. He has since moved in with another neighbor, leaving his house looking abandoned. I offered to buy it from him, I wasn't too optimistic but today he mentioned that he was thinking about it and offered a owner financing since he owns his home free and clear. He mentioned a down payment, beside that, I don't see what he would benefit from that. If I were him I would want the whole amount up front, getting a bit every month wouldn't help him much. I don't want to take advantage of him. In the long run, I would be getting a good deal on a house, but a lot of money would have to go in to fixing up that house. I would rather have him give me a lower price than owner financing, since we do qualify for the loan. Plus what would happen if he happen to died before we pay off the house?
  • May 18 2014 - Los Angeles
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Answers (10)

Hi Elena,

A VA loan will not work for a "run down house". You may need to have a different type of loan. Here's a link to understand minimum home requirements for a VA loan http://www.military.com/money/va-loans/easy-to-understand-va-minimum-property-requirements.html

Much Success!

Von 
  • June 03 2014
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Profile picture for Ask Cathy
VA and FHA loan are strick and usually require a property to be in good working order. If you get involved in an owner finance you have to have to get an attorney involved and have paperwork worded in such a manner that states if the person  that's financing the house dies you owe no more money and the house defaults to you basically giving you the house. If he would do that.
  • May 20 2014
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VA loans require the property to be in good condition, so I doubt  you will be able to get VA funding. That's probably the reason he offered "owner financing".
  • May 20 2014
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Profile picture for danielstoj
I doubt the VA will lend on a house that is run down and where the roof is fire damaged. There are many other ways you might be able to finance the purchase including an FHA 203k Rehab loan.

Another possibility is to purchase the home with owner carry financing. Once you have completed the repairs, either sell it, or refinance into an investment property loan and rent it out.
  • May 18 2014
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Profile picture for jkajs
I am trying to sell my mothers home in the 77041 neighborhood.  We are trying to avoid paying realtor costs since the house is in need of repair/renovation and we are trying to make enough to cover final expenses. Is it acceptable to hire an outside appraiser to give us some indication of the value of the house?  If so, how much should I expect to pay for the independent appraisal?  The house has an empty lot next to it that we will be selling as well.
 
  • May 18 2014
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Profile picture for Joanne Knauf
Please make sure you are paying fair market value and have a home inspection performed by a certified home inspector prior to entering into an agreement.
  • May 18 2014
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Profile picture for nealadler
First thing to do is check with an attorney that specializes in elder law. You don't want to be accused of tsking advantage of him. When in doubt check with an attorney.
  • May 18 2014
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Profile picture for wetdawgs
This certainly can be done. 

I'd recommend two things:

1.  Establish a fair market value using a paid for appraiser (out of your pocket) so that family members don't come back and challenge the price.

2.  Work with an attorney to work up a contract, lending terms etc.   Normally seller finance is higher interest rate than what is available through the market place, and requires a higher down payment.

  • May 18 2014
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Of course the whole transaction needs to be in writing and and I strongly recommend an attorney review from your perspective as well as his and his prospective heirs (estate). You would like the transaction to be a valid transfer of the property, a clear set of financial terms with expectations from both sides as to what happens if a payment is missed, etc. and how the paper transfers in the event of the seller's death or incapacity. It sounds a bit pricey but the attorneys probably have something they can pull out of a drawer that would fit this quite nicely.
  • May 18 2014
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I can see where he might want a little something every month so that he can keep legal title while you build equitable title.  It gives him a sense of still having something left to show for his life.  Just make sure there is some kind of provision for how things are handled after he passes

  • May 18 2014
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