Profit on deposit

A

Anonsensical

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Ok so I feel embarrassed to ask this but it’s been a debating point this evening…

Property scenario:
I paid a 10% deposit on a $385k block of land, settlement (full amount payable) due next year.
I can sell now for $450k. again they would pay deposit also or take over mine.

I’ve only paid the deposit so if I sell now I’ve made a profit of $45k - $38.5k correct?

I am just being told by many that my profit is $450k- $385k but I’ve not actually spent $385k as yet
 
Anonsensical said:
Ok so I feel embarrassed to ask this but it’s been a debating point this evening…

Property scenario:
I paid a 10% deposit on a $385k block of land, settlement (full amount payable) due next year.
I can sell now for $450k. again they would pay deposit also or take over mine.

I’ve only paid the deposit so if I sell now I’ve made a profit of $45k - $38.5k correct?

I am just being told by many that my profit is $450k- $385k but I’ve not actually spent $385k as yet
Click to expand...
Your profit is

450 - 385 = 65 k

To be able to hand over the deed - you have to buy the property free and clear. Thus you would have to "spend" the rest of the 385 k prior to selling it.
 
Subhotosh Khan said:
Your profit is

450 - 385 = 65 k

To be able to hand over the deed - you have to buy the property free and clear. Thus you would have to "spend" the rest of the 385 k prior to selling it.
Click to expand...
This is the simplest, and thus the best, way to explain it.
But to complicate things a little bit: you can still sell "your" property (at least in the US) even if you are still paying off your mortgage to your bank, which co-owns the property. The banks gets its balance, and you get the rest, which might in you case might include a profit or a loss. Similarly, one can say that in the original post there are 2 owners and 1 buyer:
  • Owner 1 still owns 90% of the property ($346.5k) before the final settlement.
  • Owner 2 (a.k.a. original poster) owns 10% of the property ($38.5k)
  • Any sane buyer would settle with both owners, and thus first pay off $385k, with $346.5k and $38.5k going to owners 1 and 2 respectively.
  • The balance of $65k goes to owner 1, which is the profit in question.
 
... and to complicate it even further, I can imagine at least two different contracts in the original post:
  1. Owner 2 buys 10% of the equity in the property, and owner 1 still owns 90% of the property. Such contract would entitle owner 1 to 90% of the $450k sale price, which means that owner 2 would get only 10% of the sale price and make only $6.5k in profit.
  2. Owner 2 buys the property by paying 10% down and borrowing 90% ($346.5) from owner 1. This is the case where owner 2 makes $65k in profit because owner 1 is only entitled to the amount of the loan. To avoid further complications I am not considering any interest on the loan ;)
 
blamocur said:
... and to complicate it even further, I can imagine at least two different contracts in the original post:
  1. Owner 2 buys 10% of the equity in the property, and owner 1 still owns 90% of the property. Such contract would entitle owner 1 to 90% of the $450k sale price, which means that owner 2 would get only 10% of the sale price and make only $6.5k in profit.
  2. Owner 2 buys the property by paying 10% down and borrowing 90% ($346.5) from owner 1. This is the case where owner 2 makes $65k in profit because owner 1 is only entitled to the amount of the loan. To avoid further complications I am not considering any interest on the loan ;)
Click to expand...
What about Lawyer's fees, Home-owners-association fees, realtor fees - who is going to pay for those?:ROFLMAO::sneaky:
 
blamocur said:
Yes, I know, I got carried away. But the original post was not stated as a purely math problem.:unsure:
Click to expand...
Subhotosh Khan said:
What about Lawyer's fees, Home-owners-association fees, realtor fees - who is going to pay for those?:ROFLMAO::sneaky:
Click to expand...

That response was purely in jest. Last year, we sold our home and I did not know that there were so many types of fees .......
 
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