Calling all experts.... - Posted by Juanita

Posted by JT-IN on May 14, 2002 at 08:13:05:


Have the Seller make the payments on the 2nd mtg, directly to you. For additional security you could ask for them to pledge a 2nd mtg on their new house…and int he event that they default, the stakes are certainly higher.

Whether they will pledge a 2nd mtg on their new house or not, depends on how motivted they are. However, I would absolutely insist on the pymts on the existing 2nd being made directly to you, end of discussion.

Just the way that I view things…


Calling all experts… - Posted by Juanita

Posted by Juanita on May 14, 2002 at 07:51:45:

Hello Everyone,

I have a motivated seller in an upscale neighborhood here in Michigan. The seller is building a new home, and needs her permanent financing by the middle of June.

The house is worth $230k.
1st mtg: $180k, 7.5%, $1530/mo including escrows
2nd mtg: $32k, payments are $375 per month.

My offer will be to take the 1st on a Land Contract, and have the seller make the payments on the 2nd. My exit strategy will be to sell on a Land Contract, $249,900 with 10% down, and $224,910 financed at 10% ($2245/mo), for a cash flow of $715 per month.

The only way I think I can get this deal to work is to get the sellers to make the payments on the 2nd mortgage. I’ve heard other investors having success with this. How do I protect myself, and ensure the seller will continue making the payments? The sellers also realize that they are to make the payments (on both loans) until I can find a suitable buyer. How do I write up the documents to reflect these two points? Also, how do I adequately protect myself (mainly in the case of the seller paying the 2nd).

All help is appreciated. This site is great!


Re: Calling all experts… - Posted by Brent_IL

Posted by Brent_IL on May 14, 2002 at 12:48:47:

I’d have the seller deed it into a title-holding trust with a corporate trustee and third-party bill paying. Your title company or attorney can write the documents for the first one. It’s not a do-it-yourself project.

The new buyer via land contract will be flawed and will probably have 5% or less to put down on the property. If they were a moderate risk borrower, they could have paid less than 10% down and gotten 7.5% interest on a bank note mortgage.

I agree with JT that it’s a good idea to get a performance mortgage. I’d try for a blanket on both properties.

Re: Calling all experts… - Posted by Terry (Houston)

Posted by Terry (Houston) on May 14, 2002 at 08:38:07:

To have a seller make payments on a 2nd that big I would always keep in mind that one day you will have to start making those payments.

Someone gets sick? Medical bills, lawsuit, loses their job, divorce, credit gets shot do you think thay will keep making it?

Not being a naysayer but that is a huge nut for someone to keep making, the $32,000, not the $375.

Just keep it in mind and if the deal is worth it go for it…

Just as I see it…

Terry (Houston)