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How do you respond to sellers who ask for interest or respond to your offer with “how much interest am I getting with that payment?”
One way that I justify my monthly payment is I say “The House can not afford to pay more”. I will show them by adding up the monthly taxes, insurance, 10% vaccancy factor, and 10% main. and repairs and subtract this from the fair market rent show them that the house can only afford to pay so much.
Last night on the confrence call Prentus told us about a technique that he has used were he tell the seller that he will give them 10% over their asking price, hence they are getting 10%.
Both techniques can justify a zerro interest loan.
Don Wede
Thanks, Don. Your reply is very helpful.l I wasn’t able to attend the Tuesday call. I was planning to download it today and listen.
I gota ask. I ve seen this in a few other forums and don’t know what it means…”bump”
If people ask “how much interest am I getting with that payment?” I tell them, “it’s a principal-only payment”. I also say, “if you’d like interest, I’d be happy to pay you interest, but the price will have to be closer to my cash price (remember, my 15-year No-Interest price is about twice as much as my Cash price). And then I say: “I’d much rather pay you the interest than the bank.” Since my Cash offer is 70 per cent of market, getting an owner carry back at 6 per cent is a great deal, with lots of potential profit centers down the road (negotiating early payment or discounts for pre-payment etc).
Hope that helps.
Rich
AnonymousRich
since most people only know one way to buy real estate, down payment and get a a loan, what do you tell sellers when they ask how much are you going to put down. Or if they see your 3 offers and ask, why isnt there a down payment?Got a lot out of your call with Jackie
Dee
Dee:
When I get this question I respond by saying, ” I can give you a down payment. How much do you want? But for every dollar cash I expect to receive two dollars in equity. If this is a stubling block then I like to trade down payment for pre paid payments
Don Wede
Back to the interest question. If someone is fixed on getting interest I may have to conseed. I always come back to my statement that the house can not aford a larger monthly payment, so if I have to give interest we will have to streach out the length of the payments.
Don Wede
AnonymousOn the call, Richard Kelly mentions both the software “Time Value” and a “Calculator Course” by Gary Johnson. I can not find any trace of either of those two things online (Either the course or the software). Could someone please point me in the right direction?
Thanks
Andrew
Andrew:
Just put T Value Software into a search engine and it will pop up all over the place.
Jackie can get you intouch with Gary.
Don Wede
AnonymousHi All,
So if I wanted to buy from an Owner Occupant that agreed to sell to me with Owner Financing on terms with payments less than P&I with a balloon … that would NOT comply with the SAFE Act or Dodd-Frank reform?
If so, does anyone have any suggestions for structuring Seller Financing deals?
I’m trying to figure out how to buy on terms with payments that make sense in my market (Santa Clara County – where home values & mortgage prices are much higher than current rent rates). Fully amortizing notes will make the payments too high to cash flow unless the note is for really long terms…
AnonymousYou can BUY with seller financing all day long if you are buying from an owner occupant.
the SAFE act restricts your ability to resell with seller financing. But… they just updated the law to allow for 3 seller finance deals a year. In texas it is 5 a year.
If you have 2 LLC’s you can to twice as many
If you have 3 llc’s you can do 9 a year
basically, we’re BACK IN BUSINESS of buying AND selling with seller financing.
I have heard this argument re: 3 seller financed deals per entity (ie: an LLC, Trust etc..).
I am sorry but this is the Fed and the courts are not stupid. It will be seen for what it is.
I do not think this is such a great idea.
While it is true the a homeowner is exempt for 3 transactions in 12 months it is for the Mortagage Originators License, the loan still has guidelines that is problemsome for seller financing. Read Below:
The Dodd-Frank Wall Street Reform and Consumer Protection Act (PL-111-203), signed into law July 21, 2010, allows up to three residential seller carrybacks a year ( a.k.a. seller financing, cash flow notes, seller-held mortgages, owner financing, etc.) without a mortgage originators license. This voids the HUD interpretation of the SAFE Mortgage Act, which did not allow ANY seller residential carrybacks without a license except if sold to close family.
The section of the Act reads:
?Mortgage originators?does not include?a residential mortgage loan, a person, estate, or trust that provides mortgage financing for the sale of 3 properties in any 12-month period to purchasers of such properties, each of which is owned by such person, estate, or trust and serves as security for the loan, provided that such loan?
??(i) is not made by a person, estate, or trust that has constructed, or acted as a contractor for the construction of, a residence on the property in the ordinary course of business of such person, estate, or trust;
??(ii) is fully amortizing;
??(iii) is with respect to a sale for which the seller determines in good faith and documents that the buyer has a reasonable ability to repay the loan;
??(iv) has a fixed rate or an adjustable rate that is adjustable after 5 or more years, subject to reasonable annual and lifetime limitations on interest rate increases; and
??(v) meets any other criteria the Board may prescribe;?I have used trust for over 20 years and beleive that they will be the best entity to use with seller financing.
Like stated on this form, the benificial interest in a trust is personal property and not subject to the law. The instalment note should be secured by the benificial interest in the trust. Then I record a performance deed of trust against the property if I am the seller.
Hope this helps,
Speare
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