From: alvin@zany.mips.com (Alvin Oga)
Newsgroups: misc.invest.real-estate
Subject: Re: Shared Equity
Date: 14 Aug 1992 22:50:05 GMT
Organization: MIPS Computer Systems, Inc.
Distribution: usa
Reply-To: alvin@zany.mips.com (Alvin Oga)
NNTP-Posting-Host: zany.mips.com

		o We let the other party to the shared equity arrangement move
		  into the property for NO MONEY DOWN.
You might want to get some cash up front for all the potential future problems if any
plus any closing costs and attorney fees.
You might consider about 2% to 4% of the sales price.

		o They would assume ALL payments (principle/interest, taxes, ins.)
		  and would maintain all upkeep of the property - including repairs.
ONE OF THE PRIMARY POINT FOR SHARED EQUITY ARRANGEMENT

		o They would receive all of the income tax deductions of the mortgage
		  interest and etc. since they are making the payments.
CAREFUL....depends on how title is held and which attorney/CPA you talk with

		o We would sell the property in 5 years, AND we would get our original
		  equity back and then we'd split any additional profits 50%-50% with
		  the other shared equity partner.
FALLACY:  NOBODY will pay you more than today's fair market value...
		Your original $ 15,000 loss is a permanent loss, because nobody in their
		right mind will pay $ 15,000 or more above fair market.
		YOU HAVE TOO MANY PROPERTIES IN TEXAS for no-money down.
		BE ESPECIALLY CAREFUL OF HOW YOU DOCUMENT THE 50/50 split.

	o We (the current owners) would essentially obtain some relief to having to make
  	  payments and taking a loss on the property.
WHEN YOU SELL A HOUSE AT A LOSS...YOU HAVE TO WATCH OUT FOR DEBT RELIEF....
Because the IRS will come looking to collect taxes on the amount of mortgage you
above and beyond the selling price of the house

	o In the end, we would get our original equity out (which right now, we can't) plus
	  50% of any additional profits, and they would get the other 50% of the additional
	  profits for relieving our debt from us for 5 years.
NOT A REASONABLE ASSUMPTION THAT YOU'D GET YOUR LOSS EQUITY BACK BEFORE SPLITTING THE
'APPRECIATION'
NOT A REASONABLE ASSUMPTION THAT THE PROPERTY WILL APPRECIATE SUFFICIENTLY IN 5 years.
	
	1)  The loan on this property is not an assumable loan.  So, what is the difference
	    between this arrangement and a regular assumable loan?  Does all of this have to
  	    be coordinated through a mortgage company so that the interest and taxes are
	    accurately recorded for the "other party" and not to my wife and I?

GOOD IDEA TO DO THE PROPER DOCUMENTATION FOR YOUR AND THE BUYERS PROTECTION.
Talk with a 'knowledgeable attorney' having done these types of deals before.
The mortgage company may not necessarily need to be informed...if you're willing to be
liable for the loan.

	3)  How do we establish the basis for the value of the house new?
THE VALUE IS WHAT THE BUYER IS WILLING TO BUY THE HOUSE AT USING TODAYS FAIR MARKET VALUE
and most like be appraised.

	4)  What happens if they default?
THAT'S YOUR MILLION DOLLAR QUESTION....
IF its's done wrong...you're up shit creek.....If it's done right...no problem.....
This answer will take several hours of explaining....	

	5)  How should we go about finding an interested "other party"?  I'm assuming that
RUN AN AD IN THE LOCAL PAPER....NOTHING DOWN...NO QUALIFYING
AVOID real estate agents...especially if they don't understand 'shared equity'
Work with a real estate attorney whom are familiar with this 'good creative real estate stuff'.

MORE PROBLEMS....HOw about IRC 1031 & IRC 1034 issues when you sell now vs selling later
		What if the mortgage gets called when you do the improper paperwork
		

IF this was a california property......you would have been in luck
IN texas, they some real peculiar tax and real estate laws...some dangerous laws...

GOod luck.
alvin		alvin@mips.com
(408) 988-8500












Newsgroups: misc.invest