Late last week, Realtor.com released its “State of the Housing Union,” an annual report published shortly prior to the president’s State of the Union address. The association stated, “The housing… more
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Are you contemplating investing in property? 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 every seller will be interested (or even understand) the concept outlined. Your better gamble is to locate a property that the owner has great desire for selling, whether because of moving, divorce, or they are frustrated with the folks renting the property.
Actually, if you are currently renting and considering using this technique perhaps the owner would be glad to assist you! There are a few variations that can be used depending on you and your owner. Do they need 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 repayments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make obligations while the property stays in the seller’s name.
You take over the first mortgage and get a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time period – two or three years. Instead of having the money stay in a bank they could be collecting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term draws to a close you need to be able to refinance the cost, or you could sell. Unless you hit a real bad market the value of the house should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank could still be scared there are a lot of financial lenders that would want to make a deal. Financiers prefare real estate. The mortgage is mostly around 60-70% of the value of the land, so as long as they understand they get their money back in the value of the land if you default, they do not care what sort of revenue you make. Complete the deal with a 2nd mortgage created with the seller. If you default they can eventually foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the complete picture. It is better that seller and buyer may work together. In the event they can’t wait for a sale, you could still give them their initial price with a little overall flexibility on their part.