Mississippi real estate investors who agreed not to bid against each other at foreclosure auctions are now facing fines and even jail time. Last week, three more investors pled guilty to designating a winning bidder in advance of auctions and accepting payoffs from each other in exchange for agreements not to bid. At least two of those investors have steadfastly maintained they had no idea they were doing anything wrong, although they have since pled guilty to the conspiracy charges.
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Are you contemplating investing in property? However you do not have enough cash to do so. Here is a tip you can 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 wager is to find a property that the owner has great desire for selling, whether because of moving, a divorce settlement, or they are frustrated with the people renting the place.
Actually, if you maybe currently renting and thinking about using this strategy perhaps the owner would be happy to assist you! There are several variations that can be used depending upon you and your vendor. Do they desire the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to assume the mortgage. If you can’t get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make payments 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 frame – 2 or three years. Rather than having the money sit down in a bank they can be getting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term ceases you should be able to refinance the cost, or you could sell. Unless you hit a genuine bad market the value of the house should have risen by then.
A lot of mortgage lenders merely want to make a good investment. While your local bank could still be lacking confidence there are a lot of financial lenders that would like to make a deal. Financiers like property investing. 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 kind of revenue you make. Conclude the deal with a second mortgage created with the seller. If you default they can eventually foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can observe the complete 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 initial price with a little versatility on their part.