ATTOM Data Solutions’ Q3 2017 U.S. Home Affordability Index, released October 5, indicated that home affordability in the third quarter improved compared to the previous quarter in 60 percent of… more
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Are you thinking of investing in real estate? However you do not have enough cash to do this. In this article is a tip you may 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 very best gamble is to locate a property that the owner has great interest in selling, whether because they are moving, a divorce settlement, or frustration with tenants.
Actually, if you maybe currently renting and thinking of using this technique perhaps the owner would be happy to assist you! There are some variations that can be used depending upon you and your seller. Do they need the market price or are they just desperate to get out from the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the first lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the original mortgage and make a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – 2 or three years. Rather than having the money stay in a bank they could be collecting a high interest over two or three years with the remainder due in full at the end of the term.
When the term draws to a close you should be able to refinance the cost, or perhaps you can sell. Unless you hit an actual bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely need to make a good investment. While your local bank could still shy away there are plenty of financial lenders that would want to make a deal. Financiers like real estate. The mortgage is usually around 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 income you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the whole picture. It is good that seller and buyer can work together. In the event they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.