Sweet Deals Often Are
Too Good to Be True

Question: I have an opportunity to purchase a farmhouse and 40 acres of land for $300,000; a private company was willing to purchase the same property for $800,000. This is a great opportunity to make a big profit, but I have a few questions.

I am 23 years old, earn about $35,000 a year and have good credit. With my current income and earning potential, I won't qualify for a mortgage of $300,000 because I probably won't be able to afford the payments. If I raise a down payment of $150,000, will I qualify for a mortgage for the other $150,000? Is it a good idea to use such a large down payment? Finally, will a bank take my desire to resell the property into consideration when we are negotiating the mortgage?

Paul: If I had a chance to purchase a property for $300,000 and someone else was willing to pay $800,000, I don't think I'd let much stand in the way. On the other hand, I learned long ago that when something sounds too good to be true, it usually is.

My suggestion is that you consult with a good real-estate agent who can give you a written comparative market analysis of the property. This will tell you the property's true value and let you know if you are getting a great deal or just being scammed.

If you really can buy the property for significantly less than its market value, you just need to tie it up, then resell it. You can use a contract in which you have the right to assign the purchase and assign it to another buyer right out of escrow, pocketing your profit. Alternatively, you can try for an option on the property and then sell the option rights to the new buyer, again pocketing your profit. In short, any good real-estate attorney should be able to help you make your profit without ever completing your purchase.

Mr. Irwin has more than 25 years' experience as a Los Angeles-area real-estate broker. He is the author of more than two dozen books about real estate and is recognized as one of the most knowledgeable writers in the real-estate field. Mr. Irwin's most recent book is "Power Tips for Buying a Home for Less," (McGraw-Hill, 2000).

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Paul, Philadelphia

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