When a bank takes back a property as a result of foreclosure, it’s called an REO (real estate owned) property. Since banks aren’t in the business of owning property, it’s possible to buy REO properties for a discount. Many factors will affect the price: Location, property condition and interest in the property all come into play. If […]…
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Are you contemplating investing in property? However you don’t have enough money to accomplish this. In this article is a tip you are able to use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best guess is to find a land that the owner has great desire for offering it, whether because of moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you are currently renting and thinking about using this strategy perhaps your landlord would be happy to help you out! There are several variations that may be used depending on you and your seller. Do they want the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The easiest method is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the original 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 get a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – 2 or three years. Rather than having the money stay in a bank they can be getting a high interest over 2 or 3 years with the rest due in full at the end of the investment term.
When the term draws to a close you need to be able to refinance the cost, or perhaps you could sell. Unless you hit an actual bad market the value of the property should have risen in that time.
Most mortgage lenders merely want to make a good investment. While your local bank could still be lacking confidence there are plenty of financial lenders that would wish to make a deal. Financiers prefare property investing. The mortgage is usually based on 60-70% of the value of the property, so as long as they understand 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 second mortgage created with the seller. If you default they could eventually foreclose on the property and sell it, settling the existing mortgage in the proceeds.
Now you can observe the entire picture. It is good that seller and buyer can work together. If they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.