Need Help With Sub To...I Am Confused
OK, I am confused. My realtor has sent me listing where the seller may be willing carry the mortgage. Some are asking upwards of $6K to $20K down. I understand that one of the creative ways to do this with no money down is to offer the down payment in a note. Is there another way to do that and is this different from a wraparound mortgage? Maybe it is the terminology that has me confused. Would the down payment be paid separately from the mortgage that you took over and does it have different terms? How often do sellers accept this type of deal? Also how is a real estate agent paid in a deal like this? Will this cost me more than it should sans realtor? Thanks to all for their help. :-D
Most people are not familar with SUB2; only contract-for-deed or such.
I'll explain the difference:
SUB2: The loan stays in the sellers name. You make an agreement to start paying the loan, but make no guarantee to the loan. Title passes to you at closing. The seller is no longer involved. You give the seller cash at closing for the difference in purchase price to loan amount.
Contract-for-deed: The property can currently have a mortgage or not. You sign an agreement with the seller saying you will pay $XXX per month for X years with a baloon (or no baloon). When you pay off the contract, the deed will pass into your name. The seller may ask for a down payment on this contract.
SUB2 is my perferable aqusition method and contract-for-deed a good exit method. GOOD LUCK
Thank you myfrogger for your reply. I was even unaware that there was a closing with sub2's. So, if I am understanding this correctly, I will negotiate whatever terms that we agree to. And there are closing costs and the real estate agents get paid, etc. OK, the light is coming on. I was totally unaware that these types of transactions went to closing. Don't laugh, I am just a little green. But I am liking this method.
Quote:
On 2004-03-25 02:54, myfrogger wrote:
Most people are not familar with SUB2; only contract-for-deed or such.
I'll explain the difference:
SUB2: The loan stays in the sellers name. You make an agreement to start paying the loan, but make no guarantee to the loan. Title passes to you at closing. The seller is no longer involved. You give the seller cash at closing for the difference in purchase price to loan amount.
Contract-for-deed: The property can currently have a mortgage or not. You sign an agreement with the seller saying you will pay $XXX per month for X years with a baloon (or no baloon). When you pay off the contract, the deed will pass into your name. The seller may ask for a down payment on this contract.
SUB2 is my perferable aqusition method and contract-for-deed a good exit method. GOOD LUCK
What is the difference between contract for deed and a typical lease option? Is there a difference? Thanks
Ramgon,
You had asked about the difference between a lease option and a contract for deed.
The simple explanation is this;
with a lease OPTION, you merely have the EXCLUSIVE RIGHT to buy the property, at preset terms and price within the OPTION. You are NOT OBLIGATED to buy this way, but the seller IS OBLIGATED to sell to you, and you only, unless you default or terminate the agreement.
with a CFD, which is also known as a 'contract sale', or 'agreement for deed' or a 'land contract', and sometimes a 'bond for deed' or 'bond for title"............depending on what state you are in. (Each state has its own laws and practices, which dictate what these are called and how the law handles them etc.)
Anyway, with a CFD, you are obligated to pay the seller a certain dollar amount.
This is an installment sale of real estate.
You are granted "Equitable title", which means for tax purposes, you are the owner.
However, until you fulfill your obligations within the contract sale, the seller remains on title, holding "Legal title" to the property.
I seem to recall a glossary either here on this website, or another that defines common RE terms.
Might be worth finding and printing for reference.
HTH,
JimFL
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