9 Things to Know When Buying at Auction – Part 2 of 2

Source: https://thinkrealty.com/9-things-know-when-buying-auction-part-2-of-2/

In the first part of this series we discussed five things to consider when purchasing an investment property at auction. In the second part, we will be discussing the advantages,… more

The post 9 Things to Know When Buying at Auction – Part 2 of 2 appeared first on Think Realty | A Real Estate of Mind.

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Are you contemplating investing in real estate? But you do not have enough cash to accomplish this. In this article is a tip you may use as long as the property seller is willing to negotiate with you.

To be fair, not all sellers will be willing (or even understand) the concept outlined. Your very best guess is to locate a land that the owner has great interest in offering it, whether because they are moving, a divorce settlement, or frustration with the folks renting the property.

Actually, if you are currently renting and considering using this technique perhaps the owner would be glad to help you out! There are some variations that can be used depending upon you and your seller. Do they desire the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?

The simplest way is to consider taking over their mortgage obligations – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume the mortgage. If you can’t get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make payments while the property stays in the seller’s name.

You take over the original mortgage and make a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – 2 or 3 years. Rather than having the money stay 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 term.

When the term ends you need to be able to refinance the cost, or you could sell. Unless you struck an actual bad market the value of the home should have risen in that time.

Most mortgage lenders merely need to make a great investment. While your local bank may still shy away there are lots of financial lenders that would wish to make a deal. Financiers like property investing. The mortgage is mostly 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 don’t care what sort of income you make. Complete the deal with a 2nd mortgage created with the seller. In case you default they could eventually foreclose on the property and sell it, settling the existing mortgage with the proceeds.

Now you can see the entire 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 asking price with a little overall flexibility on their part.

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