If I buy a property and then resell it in a couple of months, or even a month if I get lucky, will my buyer have trouble getting a loan to purchase if I haven’t been on title for very long?
I’ve also heard of purchasing in my name and then assigning to a land trust. Then if I sell in a month or so, would my buyer have trouble with financing if I’m not on title very long?
I was considering getting my mom to be my trustee, but I don’t want to have to drag her out every time I write a contract. How do other investors get around that? i.e. my reason for question 2.
you do not have to worry buyer and bank do not get along (you are the bank ) as they are not in the deal !!! AND you can sell it for as much as you can ( the buyer will pay) with only 5 % down //// then sell the note you make and cash out of the whole deal in 30 to 60 days tops ----- you said you were going to sell it in a month or two therefore out of the deal in 30 to 60 days
Real Estate 001-where you said
Re: buy and resale financing question
« Reply #1 on: Today at 09:38:18 AM »
yes OWNER FINANCE OWNER FINANCE
you do not have to worry buyer and bank do not get along (you are the bank ) as they are not in the deal !!! AND you can sell it for as much as you can ( the buyer will pay) with only 5 % down //// then sell the note you make and cash out of the whole deal in 30 to 60 days tops ----- you said you were going to sell it in a month or two therefore out of the deal in 30 to 60 days
hope this helps
I am very intrigued by your technique. I understand about the 5% down however how would someone owner finance if they have a mortgage on the property and it needs to be paid off when they sell? How would they go about acquiring the note that says the balance owed to them is $$xxx,xxx (after the mortgage is paid of course) without actually getting the funds. Does this technique only work if the property is free and clear of mortgages? Or is there a way to do it even with a mortgage. I find that to be a great option to sell fast if it can be done with a property that has a mortgage…please explain I am very interested in finding out more about this method…thanks
:cool okay what you would need to do is a owner finance wrap
it other names as well but we will go on
you make a whole new note that includes the in place mortage /// it would cover the current payment plus your monthly profit
btu when you sell it you need to make sure it is for a mount to cover the old mortage as well a little something for you //// it is a smaller amount you will get if there is amortage in place that needs payed off first
Wrap-around mortgages only work when the the mortgage being “wrapped” is assumable and there is where the “rubber hits the road”—the new buyer must meet qualifications and have approval of the original lender before an agreement of this nature can be done (unless you are assuming a pre-1989 FHA/pre-1988 VA loan).
What can happen if you do it without the lender’s consent or foreknowledge? Not much except a “due on sale” clause that demands immediate payment of the “wrapped” mortgage upon sale or transfer…When this happens it goes by a different name, an illegal assumption scheme.
Done correctly, there is some benefit for the home seller (because he/she can justify a higher sales price)—done wrong is a one way ticket to trouble…
Ok I get it…now how would create the note? Is this something that needs to be recorded? What makes it legit?
And who would you sell it to?
If the current mortgage is not assumable, which most mortgages are not, and you create the note would the current mortgage holder really be upset as long as they are being paid off?
Im assuming that since there is a note being taken which must be sold at a pretty good discount then the prop would need to be sold at top dollar in order to cover the current mortgage and still make a profit correct? Any idea what the note buyers usually pay? %?
:cool first if you are paying the seller the monthly payments and he then in turn is paying on his current mortage there is no fraud or illegal things going on it is like in a way a sub-2
AS well if it was anything illegal then there would be no note buyers who buy wrap mortage notes //// and there are a lot of them i deal with at least two that do
now as far as the discount on the note this has to do with a few things if it is very new the note has a higher discount being new and looks more at down payment and buyers credit score
IF the note has a few payments on it the discount is less as it is a performming note
to give you a # would be wrong at this point as i know not a thing about the note you would have for sale
BUT our people will pay from 75 to 85 on most new notes 30 days or less most of the time
:cool EZ take it easy no one was putting a question as to your knowing a thing or two
if the note is made and sold and there is money to pay off the first main mortage then all the world sleeps easy and well
THIS would and is not a way to buy for every property BUT there never is only one way to buy every property this is why we have so many people doing so many things in this business
It’s more than likely that the (wrapped) note will have been sold, thus “retiring” the original loan, long before the bank calls the DOS.
At this point in time, as a lender, now would not be a
good time to do so.
Let’s see if I have this straight—we are going to do a wraparound from the seller (so the buyer can assume a mortgage without qualifying or paying homage to any assumability agreement in force) and then sell the loan to a note broker who will then will pool it and sell it to a servicing lender—so the note will pass through potential 2-3 hands without the original lien holder knowing about this?
Once anything hits title, the jig is up and that’s when somebody get’s hit with the due on sale—but don’t believe me, give Bank of America or any other bank a call and run through a hypothetical arrangement and see what they say…
Wraparound mortgages and assumability clauses are in contradiction—there in lies the issue with this strategy.
:cool HEY HEY go back and read the first post the poster is not talking as i see it about any assumable loans ??
BUT a seasonning deal for hisnew buyer as he has not held title to property for only a few months !!!
SO as i said in the start owner finance as poster would be the bank and he would not care if he had property for one day or 100 he will finance the new buyer and sell note to a broker //buyer and cash out of the deal !!!
SO some people were going off in to a place theposter was never going as i see it :bobble
Well back to the original question in the post; there are several lenders who will allow for no seller seasoning when doing purchase mortgage (especially if the borrower is purchasing for a primary home). Assuming that the deal is straight forward, the biggest issue you might come across is estiablishing market value. Having a copy of your “subject to” appraisal from your intitial purchase handy should help with this issue. (You did have one done, right? :biggrin)
Once anything hits title, the jig is up and that's when somebody get's hit with the due on sale---but don't believe me, give Bank of America or any other bank a call and run through a hypothetical arrangement and see what they say...
Hey Scott,
Not trying to argue or anything :beer, but
if I am reading this thing correctly, the wrapped note
would be sold at or very soon after it was created…
hardly any time for a bank to notice anything.
Besides, that loan that has the DOSC within its verbiage
will be paid off whenever the newly created note (the
one that wraps the original) is purchased.
This is done pretty often, is considered “clean”, and
has little chances of any DOSC being invoked (unless
the note is purchased 6 months + after the wrap is
created).
No personal foul called here—the strategy of using a wraparound mortgage to get around predefined and contracted No assumption or assumption by approval only guidelines requires a factor that I don’t involve in my business (or the business of my clients)—LUCK.
I’m not saying it can’t be done, I’m just saying I wouldn’t do it nor would I advice my clients to.
In some states, escrow companies are required by law to inform the original lien holder of the wraparound intentions (Jig is up at that point AGAIN) and if if it lands on title, then it’s bye bye birdy.
In the case of wraparounds provided/funded by the seller, the payment from the buyer would not go to the seller, but to a 3rd party who would transmit payment to the original lender.
In instances like these, the seller is taking an unordinate amount of risk (he is still liable for the original loan & doesn’t know if the mortgage payment to the original lender is being paid on time or at all).
The home seller who does a wrap-around can’t diversify his risk and runs the risk of one or all of the following happening:
Due on Sale Clause activated
Assumption Penalty/Fine (usually pretty hefty at that)
Original lender that has been “wrapped” does some “rewrapping” of their own (namely to the terms, interest rates, payments of the original loan).