[Mike Gibson]

Mike Gibson

I have a potential client that is interested in doing a HBS for the down payment and is willing to do a Contract For Deed, but wants a balloon payoff at 24 months. As long as the seller and buyer are willing to accept those terms, is that a feasible deal?

[Jackie Lange]

Jackie Lange

HI Mike

So long as the property is not in Texas, this is completely doable!

Contract for Deeds (executory contracts) in Texas changed a LOT about 15 years ago. You basically cannot do them because, the down payment cannot be non-refundable and you have to give the deed to the property within 6 months. Selling with a Lease Option falls in to the executory contract category in Texas too.

You might discuss with the seller if they would accept a $3,000 or $5,000 payment for a 2 year extension on the contract for deed just in case the buyers can’t get refinanced in 24 months. He might say yes, might say no. But it does not hurt to ask then include it in the contract.

[Mike Gibson]

Mike Gibson

Thankfully, I live in Oklahoma…and this house is in Oklahoma. I like the idea of the of a clause that permits an extension. Looking forward to the call tonight!

[Mike Gibson]

Mike Gibson

Jackie, in one of the recorded calls for HBS, you mentioned that you had a sheet of 50 tips for doing in the HBS. I looked in the file vault, but could not locate it. Do you know where I can access it? Thanks!

[Mike Gibson]

Mike Gibson

Theoretical Question on HBS: Owner sells me house for $50,000 on Contract for Deed with a balloon at the end of 2 years. I do a HBS for the down payment with a sales price of $55,000. I get $8,000 for the HBS down payment. I take it I would need to give the owner the $3,000 difference?

[Ayesha B]

Ayesha B

What is your agreement with the owner regarding the downpayment if he carries the note for you for 2 years? If it is zero, you owe nothing, if it is more than zero, you pay that to him from the down payment you receive from the HBS.

[Jackie Lange]

Jackie Lange

First, it would be much better if you buy with a warranty deed instead of a contract for deed. If you must do a contract for deed, make sure it is recorded.
You should never bring up contract for deed when negotiating with a seller unless they are nervous about selling to you with seller financing with a warranty deed. too many things can go wrong with a contract for deed.

If you do a HBS to resell it, you do not need to give the seller anything more than what you agreed to in your original agreement. You should be able to keep ALL of the $8,000 unless you agreed to give the seller part of the money.

[Mike Gibson]

Mike Gibson

Here is my original theoretical question: “Owner sells me house for $50,000, no down payment, with a balloon at the end of 2 years. I do a HBS for the down payment with a sales price of $55,000. I get $8,000 for the HBS down payment. I take it I would need to give the owner the $3,000 difference?”

Just for an example, in 20 days,, if my buyer decides to cash me out, he would owe me $47,000 ($55K minus $8K) I would owe the seller the original $50K. That’s a difference of $3K.

That was the gist of my original question. If I received $8K down payment from my buyer, wouldn’t I need to give that extra $3K to my seller so I don’t end up owing my seller my than my buyer owes me?.

[Ayesha B]

Ayesha B

55k- 8k = 47k
Underlying note: $50k

47k – 50k = -$3k

So, yes, when your Buyer refinances and pays you the balance of what he owes you: $47k, you will owe the owner another 3k since you will be short $3k of he fill $50k

[Mike Gibson]

Mike Gibson

Thanks, Ayesha – That’s what I thought. I just wanted to make sure I wasn’t missing something.