Posted by Arthur on March 15, 2004 at 17:26:59:
Thanks for your assistance Randy, its appreciated.
When i was asking about if i should ask what the existing loan rate was, it was because i wanted to know how much space i had to play with.
Thanks again.
Help me with American Terminaology - Posted by Arthur
Posted by Arthur on March 15, 2004 at 16:42:57:
Hi,
I’m a UK investor who is moving to the USA. I have been buying property for about 7 years in the UK, but things are done totally different in the USA. Its a totally different ball game.
I have seen one property whos figures seem good, but i have yet to see the property. Its an RV park with some owned modular homes, 3 houses, and 16 rented space. It generates about $80k a year in rental income.
The selling price is $450k. Advert says seller will carry with $100k down. Property also seems to have been on the market for about a year. Its not in the best part of town.
When i questioned the owner about the terms of the sellers financing, she replied,
“He has a first and there would need to be a wrap.”
Am i right in assuming that this means i take on his existing loan? I’m causous about asking questions as they may be stupid questions which would kill my credability. Its hard enough getting an agent to work with you and i had to threaten this one that i would go straight to the owner if i didn’t get the info i was asking.
What key questions should i be asking with regards to this? This sort of thing is just not possible in the UK. You either get a loan from a bank or pay cash - its that straight forward. Returning back to the USA next week, so would like to be ready for then.
Any help appreciated.
Re: Help me with American Terminaology - Posted by Randy (SD)
Posted by Randy (SD) on March 15, 2004 at 17:04:55:
Welcome to the US…An example of a wrap would be I own a property valued at $150,000 I have a first lien mortgage with XYZ bank or mortgage company for $100,000 at 6% interest. I sell this property to you on a Contract For Deed or land contract (private mortgage) for $150,000, $5000 down the balance to be amortized over 30 years at 9% interest. I have effectively created a wrap by wrapping the $100,000 original mortgage in to my CFD at a 3% profit spread, meaning I’m earning 3% interest on the money I own to XYZ.
Almost right. - Posted by DaveD (WI)
Posted by DaveD (WI) on March 16, 2004 at 08:20:36:
Randy, a wrap-around MORTGAGE means you have deeded the property to your buyer, taking back a purchase money MORTGAGE junior to, but all encompassing your existing mortgage. By definition, a contract is not a wrap. Even though a contract “effectively” accomplishes the same thing, seller retains legal title. The contract obviously is better for the seller, whereas deed is better for the buyer. The idea is to create a spread over the underlying obligation as you very well pointed out. The best wraps are against a zero percent underlying 
But let’s keep the definitions straight, OK?
Re: Help me with American Terminaology - Posted by Arthur
Posted by Arthur on March 15, 2004 at 17:09:12:
Ah ok. I guess the fact it has been on the market for a year means i can haggle down his profit spread.
So i guess i should be asking what rate he is planning to charge and the period of the loan. Is it ok to ask what the current loan rate is? or is that not the done thing?
Thanks for the speedy response.
Re: Help me with American Terminaology - Posted by Randy (SD)
Posted by Randy (SD) on March 15, 2004 at 17:20:13:
Arthur you can ask the seller any questions you like. If you asked the seller a financial question and he/she hesitates or refuses to answer your question, that probably indicates you haven’t built up enough of a rapport with your seller. The underlying financing is irrelevant when the seller is offering owner financing, you would want to know the interest rate and terms obviously.And yes you should offer less than the asking price.