Seller financing on clear title...how to present?

[Sherilynn]

Greetings.
I have come accross several properties listed at or below market value where the seller has clear title. Any ideas how to present seller financing? Theoretically, the seller would need to get a mortgage on a property that he owns outright in order for me to buy with seller financing and him to have cash now. I`m stuck on this one.

Thanks,
Sherilynn

 

[dwoychuk]

QUOTE (Sherilynn @ May 3 2010, 08:57 AM) Greetings.
I have come accross several properties listed at or below market value where the seller has clear title. Any ideas how to present seller financing? Theoretically, the seller would need to get a mortgage on a property that he owns outright in order for me to buy with seller financing and him to have cash now. I`m stuck on this one.

Thanks,
Sherilynn

Hi Sherilynn,

I was just recently listening to the interview with Tony Peters and he gave an example of a property he came across with a similar situation. If I recall correctly it turned into multiple deals because they were so happy with the outcome. I would maybe listen to that recording, as he provided a bit of his pitch to them.

Regards,

 

[roizes]

QUOTE (Sherilynn @ May 3 2010, 08:57 AM) Greetings.
I have come accross several properties listed at or below market value where the seller has clear title. Any ideas how to present seller financing? Theoretically, the seller would need to get a mortgage on a property that he owns outright in order for me to buy with seller financing and him to have cash now. I`m stuck on this one.

Thanks,
Sherilynn

Hi Sherilynn,

Not sure I follow where you are coming from but from my perspective the only cash changing hands is the down payment. The seller then giving you a first mortgage for the balance. Amount of down payment and terms of the mortgage to be negotiated but incredible benefits for the vendor: differed capital gain, very nice return on their money (say 5%?) and secured by the property. You default the vendor gets back ownership of the asset. So very secure profitable investment for the vendor with a much better return than bonds or GICs. Does it help? I`ve done it before and it was the best win-win situation ever encountered.

Simon

 

[JimWhitelaw]

Basically you want to present an offer that looks like this (using $100K value as an example):



Offer price: $100K

1st Deposit: $1000

2nd Deposit: $9000

Unpaid Sellers Equity: $90K



Then create & attach a schedule outlining the terms for repayment of the Unpaid Seller's Equity. In your case, that's likely a first mortgage on the property and the terms you agree to.



You could use the AFS docs here as a starting point, although you probably won't use an AFS, the outline of the offer is essentially the same. The lawyers involved will want to draw up additional docs for the new mortgage being created.



http://myreinspace.com/downloads/critical_forms/m/ron0legrand-canadian-quick-turn-forms/98655.aspx

http://myreinspace.com/downloads/critical_forms/m/ron0legrand-canadian-quick-turn-forms/98661.aspx

 

[JimWhitelaw]

Oh, sorry didn`t read your initial post carefully enough. For the scenario you describe where:

- seller has clear title
- seller wants cash
- you don`t want to qualify for the loan
- you want to put down minimal cash

You`re on the right track. What you`d want to do is get the seller to get financing on the property, then purchase with an AFS and make the payments on the loan. Sounds like a tricky deal to negotiate - my guess is many people in that situation are retired and don`t have the income to qualify for a new loan, nor want to take on that risk.

You might have an easier time getting a deal like this:

- seller gets some cash now & payments on the balance
- private investor gets low LTV 1st mort
- seller gets high LTV 2nd mort

That still gets you in with low cash down and no bank qualifying.

 

[Sherilynn]

All good ideas, thanks.But I am still stuck on how to present these ideas to the sellers. And yes, they are either retired and may want to travel, etc. or they are younger and are moving to a new home and would like to put the cash towards that.

I understand the benefits of deferred capital gains and monthly mortgage income, but the seller thinks "You want me to get a mortgage on a property that I already own free and clear? Are you nuts?!?"

Thanks again for all input and ideas.

Sherilynn