When MD’s (name changed) father passed two and a half years ago, she and her brother were left the family home in Wisconsin. The two continued to honor a land contract agreement between MD’s family friend, Alice (name changed), and MD’s father that had been enacted seven years prior to his passing.
Alice and MD’s father had agreed when they made the initial agreement that Alice would purchase the home the following year using her own loan. “Unfortunately, she never purchased …
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Are you contemplating investing in real estate? However you don’t have enough cash to accomplish 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 interested (or even understand) the concept outlined. Your best wager is to locate a land that the owner has great interest in selling, 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 approach perhaps your landlord would be glad to assist you! There are some variations that could be used depending upon you and your owner. Do they desire the market price or are they just eager to get out from the monthly payments – perhaps facing foreclosure?
The easiest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make payments while the property remains in the seller’s name.
You take over the first mortgage and make a second mortgage on the remaining cost of the house 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 collecting a high interest over two or three years with the rest due in full at the end of the term.
When the term ends you ought to be able to refinance the cost, or perhaps you could sell. Unless you hit a real bad market the value of the house should have risen by then.
Most mortgage lenders merely need to make a great investment. While your local bank may still be scared there are a lot of financial lenders that would want to make a deal. Financiers like property investing. The mortgage is mostly 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 land if you default, they don’t care what kind of income you make. Conclude the deal with a second mortgage done with the seller. In case you default they can eventually foreclose on the property and sell it, settling 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 that they can’t wait for a sale, you could still give them their asking price with a little overall flexibility on their part.