First Deal Question?
I have come across my potential first deal. I will just post the sellers question.
"I read through your emails. I am not familiar enough with subject to...have heard the term though. I think I like what I hear but please explain further about subject to...the first thought that occured to me though was that if I own the loan and you own the deed ...isn't that a little risky on my part??? How would we work that out so I feel confident and secure that nothing would go wrong and I am left holding the note with no deed??"
The seller owes 105k on the property. After 15k in rehab the property will appraise for 180k low end. She is two payments behind. I told her I would make up the two late payments and take over her financing. Is there a way to reassure her I am not going to just stop making payments like she asked? Or is it just a trust me issue? Thanks for any advice maybe someone wants to partner with me on this one??
You can assure her that she will not be left with a not and no deed by creating two documents in the deal. First is the promissory note for the amount that she will be financing for you. Second is a Deed of Trust, which has three parties. The beneficiary (her), the trustor (you) and the trustee (a third party). In the event that you default on the note, the beneficiary will begin foreclosure procedings on the note and the trustee will hold a trustee sale (terms will depend on your state laws). This is the way banks and just about everyone else does real estate deals. Have an attourney draw one up, or you can probably get sample ones from the internet.
Note: Both documents will have to be recorded at the couty recorders office and copies sent to each party.
I would even use a Note http://www.and.if I was loaning a significant amount of money to a friend/family memeber so you will have recourse if they try to bail on payments. That is of course if they own a house. Your note will take a second position to the primary mortgage, so if you foreclose, you will own the house but still have to pay off any moretgages ahead of your in line. If the first mortgage gets foreclosed on, you take a second position and will have to try to reclaim any excess proceeds from the trustee sale (so you could lose it all).
That should take care of some of her concerns.
Joemac, who do you recommend using as the trustee on the deed of trust? Does it have to be someone with a different last name? Similar to a land trust, right?
Suntzu18