Mortgage Assignment Case Study – The Nijmegen Near Catastrophe

One of my first mortgage assignments was a home on Nijmegen. One of my partners at the time had actually got the home under contract. Unfortunately, because we were all so new, the contract wasn’t negotiated very well. The property was already WAY underwater and my partner had to still promise the seller $5,000 cash at closing just to get her to sign on the dotted line. The upside was that this home had loads of upgrades.

There were a few problems with this home. First, the seller was a smoker and despite the new paint job and carpet cleaning, the house still had an odor.

Between the smoke, the inflated price and the need for a buyer to come with such a large down payment in order to pay us and the seller, that property sat there for around 3 months until I got a buyer call from one of my bandit signs.

The buyer I was working with had $7500 cash and was willing to use his $8000 tax credit to cover the rest of a down payment if it was needed. I showed him and his family quite a few homes but in the end, the buyer’s wife really LOVED the Nijmegen home and all the upgrades.

So, the decision was made and we put in an offer. The seller accepted and we set a closing date. This is where the problems started.

The seller was hard to handle and my partner at the time was having a tough time with her. We finally made it to closing and we all walked in and the smoke odor was powerful. This almost shut down the deal entirely.

In the end, we did close the deal that day and here is a breakdown of the funds:
The buyer brought $7800 to closing:
$1800 to closing costs
$2000 to seller
$2000 to my partner
$2000 to me
Then, when the $8000 tax credit came in, the seller, my partner and I each split that with $2800 going to the seller and $2600 going to my partner and $2600 going to me.

Total profit for this mortgage assignment was $4600. (By the way, this happens to be the least amount of money I have ever made on a mortgage assignment)

The lessons learned in this deal were numerous which is why I called it a near catastrophe, but here are the two main things I took away from this deal:

1. Don’t deal with non-motivated sellers (or be willing to patient because the sellers will usually have unreasonable expectations to be able to sell the home quickly). This seller controlled the negotiations because she wasn’t motivated enough. As a result, we had to pay her a large portion of the down payment and we all suffered through her constant changes or whims. (Funny things about your beginning deals is that you put up with a whole lot more than you would normally.)

2.  Learn how to deal with smokers. This deal could have truly ended in a catastrophe because the seller continued to smoke inside before closing.  If your seller is tough to handle like this one, it may be better to just walk away.