A lot of different “gurus” have stressed the importance of buying without your own financing to save your own credit. That tip is usually followed by an 800 number that you are supposed to call and pay a bunch of money to find out how to do it. Are they talking about using the existing loan that the seller has? How do you talk the seller into leaving the loan on his credit, assuming that the loan is non-assumable?
Thanks a lot for your help.
Howdy Ryan:
Sometimes it is not easy. I have seen sellers lose the property to foreclosure because they would not let a buyer do a sub2 deal. When the seller is motivated enough and is forced to sell the tend to get more creative and willing to listen to your ideas.
I see people talking about sub2 deals. What is that short for? And how does it work?
Howdy Ryan:
It is just what you are talking about. It is short for subject to the loan. The seller leaves the loan in place and you agree to make the payments without an assumption. Sometimes call a wrap as well.
Thanks Ted. What are some the better word tracks to talk the seller into doing that? How do you contract it? What security does the seller have if you do not pay on time? It would just mess up their credit more.
Ryan
Some folks don’t really need the cash and may nor want to pay capital gains taxes all at once (especially in the cas eof income properties). These folks will often finance the purchase to the buyer.
Keith
Howdy Ryan:
When Sub2 deals first started it was a little easier to do them. There was opportunity for crooks as well when the equity disappeared as values fell during recessions. Zero down sub2 deals were happening where the seller even paid the buyer cash at closing and made payments. I heard of a buyer who did over two hundred and never made a mortgage payment and collected the rent.
The best way to secure the payment will be made is with cash or excellent credit or both. Some deals the seller will care less what happens as their credit is shot already and you will be saving from foreclosure or bankruptcy which is worse than just several 30 day lates in a row. Also having a supply of tenants ready to move into a house and getting it rented before closing will help ease a sellers mind as well.
If I were going to buy a home this way, what type of contract would I use? Does anyone have a file download of a genaric contract?
Also, Ted, what is the 36% return thing on your signature?
Howdy Ryan:
Same contract as any other purchase. The financing would be address in the financing addendum.
I will contact you via private email re the 36% interest.