Need Help with Seller Financing
I have a newbie question about Seller Financing. I need some help in the area of understanding this . Sorry if I sound ignorent, but it's the only piece that I am not understanding.
When I approach a motivated seller for the purchase, why would the seller offer to take out another mortgage to help me with the financing on their personal property? (contd.)
This Buyer should
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The problem is that yes, they are in a riskier position, but you can always overcome this hurdle by offering other ways of putting the sellers mind at ease. You could offer a second mortgage on your personal property. You could offer a higher interest rate on the second mortgage (Watch those Cash Flow numbers though) Or offer to include in a dead equity-like a boat, time-share, car, etc.
If they are truely motivated..then YOU ARE HELPING THEM by them getting a loan and letting you assume. Not the other way around.
A lot depends on their motivation level. If they "need out", you'll be surprised at what some will do.
You need to get to where the motivated sellers are calling you...not you calling people to see if they would be interested in letting you buy their home. You do this by advertising that you buy houses...the motivated ones will call you. You are in a better position when they call you! And believe me...they'll call! Just advertise to get them to call. Bandit signs work really good and are good if you have a small budget.
You are right, they aren't going to go for it. This is one of those ideas that sounds so clever in seminars and in courses. But nobody is going to go for it really. Unless you are a smart heartless con man and they are real stupid and let you take advantage of them.
Some programs of investing in real estate confuse people totally. Certainly it is not me who is pitching about sellers refinancing or taking another mortgage. Seller financing means a note with a few thousand dollars due in a short time.
I am not part of creative investor group,so I have no idea what they tell people. You can be assured that no seller will take another mortgage to help a buyer. There is no need for that - not one good reason for the seller to do it. And positively no profit for the seller.
George P.
Mr. Real Estate
Is the seller actually getting another loan to help sell or are they just carrying back a second to complete 100% financing for the buyer?
Carrying back means that they are willing to owner finance the amount you don't have to close. Example, say you are buying for 100,000. You can only qualify for 80% or $80,000 and you can put 10,000 down. That's only $90,000. The seller offers to hold a second mortgage for $10,000 to complete 100%.
Either way the seller is willing to help you close the deal so you both can move on. This is a good thing. Most sellers don't want to help.
Depends on sellers motivation, does he need all
his cash out at close. A wrap can allow some cash out. If they need more cash out at close they might
consider professional assitance, structing deal so they can sell Note in simultaneaus close, they can sell whole Note or partial, that way could possibly get all cash out.
I do structing of these types of Notes, so the seller
knows before accepting the deal his options.
If I can help email me.
I have used this approach on several deals. If the seller is truly motivated it will work. They are not putting themselves at risk, they have a secure interest in the property.
It can be used if there is an existing mortgage on the place and the seller wants the difference in cash. He borrows the cash, now he has it! If there is NO mortgage, it works better. The seller pays NO tax on borrowed money! Hope this helps.
The answer lies in your question: "help me out in purchasing their home".
They're not helping YOU out, you're helping THEM out of a serious jam. That's why they'd do it.
If they won't, they're not motivated enough.