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Good evening everyone,
Quick question: Is there a better way to take over a mortgage other than sub 2? I found a seller on Zillow that is managing this property for her grandmother. The grandfather recently passed away and the grandmother just wants to be done with the property. The grandmother owes around $155k and they’re asking price is $260K. The house needs work, looking at the pictures from zillow; I would say around 12K in repairs. This is just an estimate until I can get eyes on the house. What is the best way to approach this potential deal?
Talk to the grandson. Do they want cash out now in a lump some. Are they happy with some cash up front and then monthly income. Take care of there needs and craft the deal around their needs.
Thanks Don, I appreciate it. The granddaughter informed me that her grandmother would only accept cash. She was not open to anything creative. I gave her 3 options, I thought my offers would be beneficial to her and her grandmother in the long run.
Another way you may be able to get what you want (subject to/seller financing) and the seller gets what they want (cash) is to find a NOTE BUYER who will buy the note at closing.
Here’s how it would work:
you would buy the house with seller financing that wraps the underlying loan.
The title company will create a note and a deed of trust or mortgage
at closing, a note buyer will buy the note which was created
the seller gets their cash
you’d make payments directly to the note buyer
the note buyer may prefer to take out (pay off) the 1st position mortgage so they are in first position. You would need to discuss this all with them in advance. They would need to approve the language in the note that they are buying too.
There is always a way… when you think outside the box!
one more thing.. make absolutely sure you are talking directly with the person buying the note and NOT A NOTE BROKER.
A note broker is a middle man/woman and has absolutely no authority or ability to actually buy the note themselves.
Check out First National Acceptance Company. They have been buying paper since the mid 80s. They are a subsidiary of First National Bank of America. They are based in Lansing MI but buy all over the country. They even buy contracts. 855-265-3397 ext. 7637 Grace Chang
Jackie & Don,
That is some great advice, I never would have looked at the deal or any deal from that angle. I appreciate your experience and advise.
Thanks Jackie & Don!
Who can I speak with about creating notes?
Seller: would like 400K
Term: 5 year balloon
How would I create a note to give the seller the 15% down?
Watching baseball few cocktails I’ll get back to you in the a.m.
I need more information. What is it a single family home? Is it a home you will live in or is it a property you will rent, flip, or sell with carry back financing. What is the value of the property repaired? Does it need any repair? Is the property free and clear or is it encumbered with debt, and if so how much and is it a 30 fixed rate note at a good rate? Long story short, describe the property, debt on it and what are your intentions for the property to make a profit.
Morning Don, I don’t have any properties that I’m working on that I need to create a note. I was asking in general, if I had to create a note. How would I go about doing that? I know what a note is but, I don’t know how to structure it.
Let’s use this as an example
Seller asking Price: 250k, the house is free and clear, no repairs. Seller would like 25k dn, with a 6% int rate, with a 5 year balloon. I don’t have 25k to put down. How can I create a note for the 25k?
You’d always want to close any deals at a title company or escrow office or attorney’s office. They will create the note for you – based on the information you give them. Each state has different rules and regulations of terms and conditions that need to be in the note. So, to answer your question, YOU do not need to create the note. The title company will create the note and the deed of trust of mortgage for you. The note is not recorded but the deed of trust or mortgage is recorded and the title company will take care of that for you.
However, in the scenario you mentioned, it would be impossible to find a note buyer who would be interested in buying a $25,000 2nd behind a large $225k first if you have NO SKIN IN THE GAME. This would not be a good deal for anyone involved.
If it were way below market, a better way to do this deal would be to get an option, then do a highest bidder sale to find a buyer. If the seller will do seller financing, you can advertise that it is being sold with seller financing to the person with the most down payment. But.. keep in mind that you need to have some equity in the deal to get anyone interested.
Just because it is seller financing does not mean that you can pay full retail even if it is in great condition
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