Every REO was at one point owned by an individual or an entity other than the bank. The owner was likely unable to make the mortgage payment and so went into default. (At this point many people decide to pursue a short sale in order to avoid foreclosure.) After the owner misses several payments (how […]…
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Are you contemplating investing in real estate? However, you do not have enough money to do this. Right here is a tip you can use as long as the person selling the property is willing to negotiate with you.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best gamble is to find a property that the owner has great interest in offering it, whether because of moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you maybe currently renting and thinking of using this technique perhaps the owner would be happy to help you out! There are a few variations that may be used depending on you and your owner. Do they need the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make payments while the property remains in the seller’s name.
You take over the original mortgage and get a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – two or three years. Instead of having the money sit in a bank they could be getting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term ceases you need to be able to refinance the cost, or perhaps you can sell. Unless you struck a genuine bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely need to make a great investment. While your local bank could still shy away there are lots of financial lenders that would like to make a deal. Financiers like property investing. The mortgage is usually based on 60-70% of the value of the property, so as long as they know they get their money back in the value of the property if you default, they do not care what kind of money you make. Conclude the deal with a second mortgage done with the seller. If you default they could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the entire picture. It is better that seller and buyer may work together. If they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.