How do you properly fill out a contract with the proper wording? I don’t know if this matters, but I’m in california.
are you writing the contract?
a standard real estate contract is 6 pages in Calif if I recall correctly, plus some addendums; what specifically are you concerned about?
Mike in Calif.
Yes, I am filling out the contract so that I can take control of the property and wholesale it to another investor.
My questions are:
- How do you typically word a subject to deal?
For example:
Seller owes $350,000
ARV is $500,000
Seller needs $10,000 in cash
Mortgage monthly payment (PITI) is $2000 @ 6% fixed
How would I write in the contract so that I pay the seller the $10,000 that they are asking plus taking on their existing mortgage? Keep in mind, my exit strategy is to simply assign this contract?
- How would I write in the contract a Terms deal?
For example: Using the above numbers
Seller owes $350,000
ARV is $500,000
Seller is asking $500,000
Equity spread is $150,000
In this example, is there any room for me to give them any cash at all? If the house needs $20,000 in repairs, is it still a good deal?
What kind of Terms would you do based on this information so that it benefits the investor I’m wholesaling it to also?
If the seller is financing the $150,000 what is a good payment schedule and at what percentage? Would it be wise to do a balloon payment for the full $150,000 say in about 2 years?
I apologize for the lengthy question, but I’m really trying to understand how I would word these two types of deals in the contract so that there are no misunderstandings and legal ramifications?
the short answer is you are using the wrong contract. It sounds like you need to use an “equity purchase agreement”. I would refer you to spend some time at www.foreclosureforum.com (not my website; just hang out and post). There is a ton of information that will help and plenty pros to answer your questions (foreclosure is not my forte’)
Also PLEASE carefully read the code section related section 1695 and other. Calif has some strict laws in this area. Ignorance is an excuse.
Best of luck on the deal. Sounds like there is plenty of equity. Typicaly deals go down (as I understand it) is a 50/50 split of equity after repair and fees, etc.
Mike in Calif
Mike:
Using the Equity Purchase Contract, can you still do creative offers like seller financing, subject to’s, etc?
Can you still purchase preforeclosure properties at a discount using such a contract?