While the national housing market has been officially “in recovery” from the housing crash and Great Recession for quite some time now, some cities are facing a serious population shortage that is being exacerbated as current residents age, retire from the work force, and often move elsewhere. To combat this trend and fend off negative population trends, some cities are offering new residents incentives to establish households there. Those incentives may be as straightforward as cash-on-a…
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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 can use as long as the person selling the property is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your better guess is to locate a property that the owner has great interest in selling, whether because they are moving, a divorce settlement, or frustration with tenants.
Actually, if you are currently renting and considering using this technique perhaps your landlord would be happy to help you out! There are several variations that can be used depending on you and your vendor. Do they desire the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The easiest method is to take over their mortgage obligations – 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 obligations while the property stays in the seller’s name.
You take over the original mortgage and get a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – two or 3 years. Rather than having the money stay in a bank they could be collecting 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 ought to be able to refinance the cost, or you could sell. Unless you struck a genuine bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely want to make a good investment. While your local bank may still be scared there are lots of financial lenders that would wish to make a deal. Financiers prefare real estate. 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 money you make. Complete the deal with a second mortgage created with the seller. In case you default they can eventually foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can see the whole picture. It is good that seller and buyer may work together. If they can’t wait for a sale, you could still give them their initial price with a little versatility on their part.