This one has two loans. one is regular conventional. and the other is a line of equity. Do you do a sub2 deal on this? or how do you know if they can stop getting loans on the equity?
Thank you
Only if the seller agrees to close the equity line of credit, and you’ve determined that what has already been borrowed, can be paid back predictably.
You could have the seller borrow whatever he’s gonna borrow, and then close the line of credit, assuming the terms of repayment are acceptable to you, and/or don’t undermine the marketability of the financing.
Otherwise, an open line of credit is a disaster waiting to happen. It MUST be closed FIRST, in order for you to close at all.
How do we close it out. Do they just get something in writeing from the lender?
The seller tells the bank to close it, which may require something in writing. You confirm the closing with the bank. It can take a couple of weeks.
This is why you need all the information on the loan, and personal information on the original borrowers, so that you can administrate the loan (before, during, and after) the deal closes.
Been a year since I have spoken about this deal. Seller has just contacted me and they no longer have a line of equity. They owe exactly $72,000 on two loans the mortgage and the line of equity. Im going to take it over subject to. payment is $850 month with impound account.
Deal break down:
$72,000 loan.
$850 month payments.
$10,000 -$15,000 repairs.
Value $125,000.
I think Im going to Lease option out for two years see if I can do that a few times. Or just fix and flip.
what do yall think?
:biggrin
Assuming the house is habitable as-is, why not sell it for it’s ARV with say $12,000 down and get the rest in 60 months? This way you’ve put nothing into it, and it’s total profit to you over five years.
$125,000 Sale Price
$ 12,500 Initial Equity Profit (Down Payment)
$112,500 Balance Due Over 60 months
<$ 72,000> Less Loans
$ 40,000 Back-end Equity Profit
$ 12,500 Initial Equity Profit
$ 40,000 Back-end Equity Profit
$ 52,000 Total Equity Profit
Instead of discounting the cost of repairs, you treat those costs as a non-qualifying financing premium, to overcome the risk of financing the buyer without qualifying him. That’s what I would do.
Otherwise, lease/optioning a ‘fixer’ is a sure way to get very little option money, and more reason for a buyer to ask to treat his repairs as option consideration, or “sweat equity down payment.” Either way, not enough cash up front for me to waste time with it.
Otherwise, just fix it, and flip it a.s.a.p. You got the benefit of not having to pay for new financing, so take advantage of that and move on down the road.
Meantime, there’s several things not mentioned here that will keep you out of legal trouble that we’re not discussing. One is the Dodd/Frank regulations regarding financing offered to consumers. Do this wrong, and you could end up having to give every dime the seller gave you, back, including any money spent on repairs. Another thing is acquiring rights to administrate the loan(s). And not making payments personally to the bank, and how to arrange that. There a half dozen other things that are now important to know after January of 2013. Seller financing is now a federally regulated endeavor.
Hi,
Typically when a line of credit is closed it converts from an interest payment to an amortized payment usually financed over 10 or 15 years.
It will take the bank a few weeks to convert.
GR
SOLD! doing a lease option on it.
DEAL :
$115,000
$7,000 down
$1,000 month for 2 years.
Recap!
I purchasd sub 2 for $72,000
$850 month tax and inurance
sold it in less than a month.
:shocked