[Donna Ross]

Donna Ross

Hi

I am in Calif and am thinking I will make some offers on an $700k +/- owner occupied good condition fsbo house w/ seller financing. Nice, pride of ownership family neighborhood, good schools, cul d sac street, near parks/beach/shopping/employers/university/foothills-mountains. Is at discount due to economy/meltdown.

I would like to keep it at no monthly cost to me for long term appreciation, and want an owner occupant to live in it (but not me) since the home will need more care/attention than most renters will want to give it (is in an area of expansive soil so must be watered correctly, etc). I am thinking I will try to buy w/no down and use seller financing behind existing First TD….then that I could sell a half interest in the beneficial shares (with a small down plus all monthly payments paid by them) after I acquire them from Seller. Seller says he will carry financing for 15 yrs…there is a VIR 1st TD on the ppty of around 50% of the value….He’s said he would refi it if necessary into a fixed rate…..He doesn’t want to pay for title insur on the sale of the home and says he’ll only do a termite report nothing else….(I know he sounds rigid; but this is all from an Initial conversation: am thinking re his answers and coming up wi/some proposals, and will try countering).

He is retired, had heart attack recently, and wants to move out of state and have a little income….he said he’d be willing to carry for around 10-15 years since doesn’ t expect to live beyond that. He has 2 adult children; 1 with health problems also, who lives with him and his wife.

I am thinking one of my offers would be that I would propose something around his price, but with 0% seller financing 30 due in 15…(to keep payments below rent )…..I think he is hung up more on price and having some monthly income vs the actual interest rate rec’d. I think I’d rather own it than just having an option since I expect it to appreciate well and would not want troubles wi/adult children seeing if they can break the option if their father passed away (is this a valid concern?)…

then, I am thinking it is best to buy the ppty with a beneficial trust; and keep the underlying loan..
*Would it be best to wrap it, have collection dept make the payments,
or to keep the seller financing as a second TD (but still want collection dept to make payments on the First)…..? (ppty is in Calif).
*would there be any benefit to me to have the second structured differently than a simple version? The seller is not sophisticated w/ re but I have a feeling that the simpler things are kept; the easier it will be to get his ok.

The house likely should have an owner occupant so am thinking that during escrow I’d advertise for someone to buy 1/2 interest in it (subj to liens) who will be the owner occupant and agree to take care of ALL mntce and repair, payments, insur, ppty taxes………There would be no equity at first; but they since they could buy with almost no down and their monthly payments would be the same as rent; which is incredible in our expensive area..So few pple can afford to buy their own homes in this area so I think many will call to own/live in their own home even if it is only 1/2 share…… I am quite sure I would receive many calls if I advertised for $5k down (or something to come to me at close) plus the monthly payment+ expenses….And I could sell it to them on Installment Contract until there is equity in the ppty (?), or just half the shares, but am not sure how to structure the ‘we agree to sell in x years’ timing/wording of agreement….am thinking it a good keeper ppty if owner occupied. (but would not want to be forced to sell it before 10 years at earliest; unless I decided it was to my advantage to do so before then). Am not sure how to structure that wording….(?).

Jack Miller said that the rescue plan is perhaps going to cap VIR rates on owner occupied ppts from going above 5.25% approx….

I wonder how that would play out if I buy this ppty from this man w/the beneficial shares assigned to me….let’s say he moves out of state..so the loan would no longer be owner occupied at least by HIM……..can anyone give me guidance on whether I should just plan on being able to benefit from the gov’t locking the interest rate on the first; or just to be safe should I have the seller refi to a fixed rate before we close?

If he refi’s I am thinking he should take out enough to pay for the title insur and termite repairs (if any). Any input?

Am just wondering about the ?s I raised. Also am wondering how much I should budget for costs to me to put this together/close all of this….ie if any partnership agreement needed to be reviewed by attorney, how much in legal fees to review if applicable…(?)…If I close both on same day with both seller and buyers is that advisable; and will that also save me money? Anyother costs I am not thinking of ?

This house is in area of good schools, pretty cul d sac street; easy rental….pride of ownership….so am interested in owning it for long term appreciation so long as the occupant has vested interest in maintaining it nicely as the current owner has.

That ‘s it. If anyone can let me know their thoughts on this; I’d appreciate it….it would be one of my first forays into making creative offers via CREW so am hoping to avoid making costly/horrific mistakes by getting some guidance before going futher.

Thk you
d

PS> also, any insights re: when to do the home inspection, who should pay for it (me or buyers?), how to do at lowest cost while still being reliable report…
Can it be verbal by my favorite inspector (as an agent I use them a lot)….?
Any ideas?

PPS . Which forms do I use for all this? I have many of Jack’s and Jackie’s custom forms in my computer now….But who/where do I go to set up Beneficial Trust…etc. ?

[Anonymous]

Anonymous

Donna

That all sounds well and good ….BUT If I remember right, California has some ridiculous tax laws called Prop 13 or something like that.

Right now they owner may be paying $2,000 in taxes.

If you actually BUY the house, your taxes would go through the roof and kiill any cash flow

An I right about this? If so, you should NOT BUY.

Do a master lease with an option. You can secure your option with a deed of trust or mortgage.

Any time you do a transaction, you need to look at the short term and long term benefits and consequences. ( pros and cons)

California has other tax laws that could affect the seller too. Are there transfer taxes? If he is moving out of state would they tax him for that too?

If you do buy, you probably need to use a split note technique. The first note would be $350,000 and the 2nd note would be $350,000 but there would be no payments on the 2nd note until the first note got paid off.

The advantage to you is you get better cash flow

The seller could always sell all or part of one of the notes if he needed cash for something ( like a medical emergency)

Dyches Boddiford has an excellent course about using land trust. ( not called a beneficial trust).you can find it in the STORE

Jackie