Negotiation Checklist

What are the creative finance terms you might offer to a seller willing to provide owner-financing?
Here is a checklist of various options an investor might present:

1.                   UNSECURED NOTE

A.     UNSECURED BY COLLATERAL

B.     LOW INTEREST RATE

C.     LONGEST TERM

D.     NO MONTHLY PAYMENTS

2.                   MORTGAGE ON ANOTHER PROPERTY

3.                   MORTGAGE ON SELLER'S PROPERTY

4.                   TRADE PLUS NOTE

5.                   TRADE PLUS MORTGAGE ON ANOTHER PROPERTY

6.                   TRADE PLUS MORTGAGE ON SELLER'S PROPERTY

7.                   TRADE

8.                   CASH PLUS NOTE

9.                   CASH PLUS MORTGAGE ON OTHER PROPERTY

10.               CASH PLUS MORTGAGE ON SELLER'S PROPERTY

11.               CASH PLUS TRADE

12.               CASH PLUS REFINANCE

13.               ALL CASH (PAYOFF SELLERS)

 Happy Investing!

Creative Seller Terms

LET'S TAKE A TYPICAL $100K HOUSE. SELLER OWES $50K. YOU MIGHT.............

1. Assume underlying ...Seller carry back $50k second deed of trust or unsecured note.
2.  New loan for $70K...Seller carry back second for $30K...notice the low loan to value for the lender in first position.
3.  New $100K wrap loan. Pay to escrow on the whole $100k and escrow pays the $50k underlying out of payment. ..Balance goes to seller.
4. Seller refi 80% LTV (Loan to Value) ...Payoff the $50K ...Seller gets $30k net from refi...You assume $80K...Seller carries note in second position for $20K plus fees to refi ...Say $22K.
5. Give seller $60K down, with note for $40K secured by a second position equity in another piece of real estate. Get a 75% LTV loan on subject property ....Out of this $75K pay off the 60K down and walk out of escrow with $15K in your pocket.
6. Get a construction loan based on the future value of subject property ....fixed up say it is worth $130K....borrow 75% and have seller carry back second DOT for one year...$25K on note...The cost of loan is or $97,500. But they give $75K at ·closing. Use $12,500 to fix up the house out of the $22,500 available to do so ...Put $10K in your pocket out of the "pull-out" of the cost breakdown ...cost loan. When job is done...refi the property based on its new value for 90% LTV... ($l17, 000.) Payoff the $97500.construction loan ...payoff the note for $25K with the seller and you still have $4500 left over from the pull-out of the cost loan. Not bad, huh? A new house and $4500.00.
7. Offer $105K for property on a wrap (all inclusive trust deed) with terms of 8% per annum with a cash out in 10 years.
8. Substitute what the seller needs in trade for the down payment.
9. Assume $50K seller carry. back, $30K on a third deed of trust. Open second position for a ·second mortgage to go to a lender and borrow the $20K to give to the seller as down payment.
10. Does 'the seller really want to sell or do they just need some capital and their equity is their only source? What about a life estate?
11. Offer all cash at a discounted price contingent upon the underlying discounting for cash as well. Then get a new 80% loan to value loan to cash out all involved.
12. Bring in a financial partner to put up the down payment in trade for a favorable return on his investment.
13.  Bring in a financial partner to share in the equity of the subject property.

Options are another great way to keep an offer open.

A FEW BASIC MECHANICS

•  Offer earnest money with a note due at closing whenever possible
•  And or Assigns always as the buyer
• An understanding of Subordination agreements
• An understanding of Substitution of Security
•  An understanding of how to handcraft your cash flow into the offer.
• Remember that the first years of property ownership are the most crucial cash flow years.

Happy Investing!

HUD's Proposed Rules Eliminate Seller Financing!

If this is true, it would be a disaster for buyers, sellers, homeowners, and investors. In an attempt to better regulate the mortgage industry, HUD has apparently decided that it is in America's best interest to eliminate the possibility of seller financing for individuals!

If you are as concerned about this proposed regulation as I am, you must make your concerns known BY TOMORROW! Here's how:

1. Logon to www.regulations.gov You will see two white boxes for searching
2. On the left box labeled "Document Type", pull the menu down and select "proposed rules"
3. On the right box labeled "Enter keyword or ID", enter "safe mortgage". Then, press search
4. Locate the blue search result "FR-5271-P-01 Safe Mortgage Licensing Act: HUD Responsibilities..."
To read the rules: click on the blue title FR-5271-P-01 You will be taken to another page. You will see "views". You can click on PDF file or another symbol which will show you the rule document online. If you want to submit a comment after reading the document, use your back button to return to the search results and then move on to #5 below.
5. To submit a comment: On the right of the screen, across from FR-5271-P-01, click on "submit a comment"
6. Complete the form providing required information with blue asterisks and your comments and then submit. (Note: you do not need to fill in the blanks for organization name, government agency type, or government agency)

Here's what I had to say in my comments to HUD:
Please do not limit the opportunity for a buyer of any house or property to negotiate a seller-financed mortgage! There is nothing wrong, immoral, illegal or inherently wrong with seller financing! this is a method that has been used by buyers for decades--particularly in periods where interest rates are very high. In today's economy, many sellers PREFER to carry a note, as it generates a steady and predictable income stream for them. This works especially well for senior homeowners who have owned their property for a long time, and do not want huge amounts of cash to worry about having to invest, or that would disqualify them from receiving Medicaid. Also, in this economy, it allows more houses to be bought and sold--rather than leading to foreclosure! It generally results in a quicker sale for motivated sellers, and more opportunity for a motivated buyer. So why in the world would anyone want to limit the ability of a willing buyer and a willing seller to use this time-honored system of acquiring and selling property?