You never mentioned that amount of the mortgage payment. Why does the prospect of paying a couple of mortgage payments keep you from doing this deal?
Are you trying to purchase and assign the deal, or purchase and sell the house?
Here’s the deal for selling the house:
Buy subject-to and sell on a wraparound note at an attractive interest rate to a solid buyer. Since you’ll market your property as the easy financing alternative to the expensive banks and brokers, you should be able to sell fairly quickly (you did say it was in good shape, right) and minimize your holding costs. By holding your own note and mortgage, you can get this deal done very quickly. You don’t have to wait for appraisers, underwriters and everyone else to push around paperwork.
Structure you note so that payments cover the 1st mortgage payment and provide some positive cash flow. Offer an interest rate higher than market (for convenience, quickness) and allow the buyer to negotiate their rate down or, better yet, buy it down with a higher down payment.
Advertise “will finance,” “low interest rate,” and “no closing costs” to get that phone ringing. You may even ask a bit higher price since you’re offering such great terms. Pay the buyer’s closing costs and make it even easier for them to chose your home over the competition.
Make sure you get a sufficient down payment from your buyer to cover all your out-of-pocket costs. On a $410K home, I’d like to see at bare minimum of $10K, but more like $20K (about 5%) or more down from my buyer. The more you can get, the better.
Just make sure that you keep the balance of the underlying 1st below the balance on your note. If your buyer comes in with a large down payment beacuse they had a substantial equity in the old home, it’s possible that your note’s pricipal balance would be less than the underlying first. Be responsible and pay down the existing first to keep it’s balance at or below your wraparound note.
If you hold for two months with mortgage payments of $2500 per month (I just picked a number) and repairs of $2000 (cleanup and paint) and marketing costs of $1000, then you’d need $8000 available to do this deal. Of course, you’ll get that back when you close. That’s not bad for a $60K deal.
If you just can’t see doing this deal without making a few mortgage payments, this is not the deal for you. You can’t get the reward if you can’t accept the risk.
Perhaps some of you Carleton Sheets “no money down” students can formulate a no-risk, no money down stragegy for buying and selling this one. ![:wink: :wink:](/images/emoji/twitter/wink.png?v=12)
Here’s the deal for assigning the contract
First, make sure you can structure a deal so that someone like me can do what I mentioned above. Let the seller know that you intend to purchaes subject-to the existing financing and that he still has liability for that debt.
Next, purchase a 90 day option to buy the house. Offer $1000 or whatever you want to secure the option. You could offer to increase the purchase price by the amount of mortgage interest he pays between the option date and the closing date. In effect, he will get his mortgage interest back and you won’t have to make those monthly payments while you market the house. I’d suggest you complete a purchase contract along with the option contract as an addendum stating the terms of the purchase should you exercise your option.
Finally, sell the option rather than the purchase contract. Of course, the contract is a vital part of the package. You can likely make more money selling the option than the purchase contract because it required less capital and you didn’t make mortgage payments. So, let’s say you sell the option for $4000, and make $3000 (minus the $1000) option price. That’s not bad for a day’s work.
Jimbo