Posted by Melissa-So. Calif. on July 24, 2001 at 20:25:37:
Thanks Lor!!!
Seller Financing - Posted by PJ
Posted by PJ on July 22, 2001 at 10:42:42:
Having the seller finance the property you are looking to buy sounds like a great way for all parties to make money esp when the buyer can not get financing elsewhere.
My question is once you get the seller to agree to the deal what is the next step as far as making sure both sides are legally bound to the deal? Would you call a lawyer at that point to draw up the legal papers or seek the aid of a mortgage broker? And who would usually pay these fees?
I’m sure experience RE investors may not need counsel but for my first deal I would want as much help as possible.
Thanks,
PJ
Re: Seller Financing - Posted by Lor
Posted by Lor on July 22, 2001 at 13:14:35:
I do it two ways. If the seller’s property is for sale by owner, I go to the local stationery store and purchase a real estate sales contract for 50 cents. If it is listed with a realtor, I use my state’s real estate board’s contract. (realtors prefer what they are used to and there is a lot of verbiage protecting the realtor). In the section that asks for terms, you just fill in "to be financed by owner and the % rate and for how many years. i.e. 7% for 20 years. I also always add a contingency to get out of the deal. Mine is "the sale of this property is contingent upon passing inspection by (and here I put my brother’s name who is a contractor). I then have a real estate attorney review the contract. Remember a contract can be legal and valid even if written on a napkin. You need to have consideration ($) and both parties signatures for a bilateral contract. Once you have an agreement to sell, either party can pay for escrow/title. It depends on the culture of your area, county or state. For example, in my area the buyer pays all closing costs. Good luck. You need a lot of tenacity to obtain owner financing but IT CAN BE DONE.
Re: Seller Financing - Posted by Melissa
Posted by Melissa on July 22, 2001 at 15:08:05:
Just from my very limited knowledge that I’ve gained over the last few days, it seems to me that the “Owner Financing” is the easiest to understand and would be the easiest for new investors… Am I correct in this assumption?
Melissa
Re: Seller Financing - Posted by Lor
Posted by Lor on July 22, 2001 at 16:16:11:
No, it’s not easy but yes it is simple to understand. Like I said, you have to have a lot of tenacity to find someone who will finance your purchase. For me it has always been elderly people who no longer have a loan balance on their property. Often it doesn’t occur to them to offer owner financing until you sit down and show them the benefits. Being a woman and also at one time a social worker I feel that I’ve had an advantage when working with elderly sellers.
Owner financing can be an excellent tool if you can’t qualify for a loan or have little down payment and want to buy traditional rental properties. First, ask your realtor to only show you properties that have no mortgage bablance. Then start making offers. You might make 20 before someone says yes. You also have to convince your realtor to specify in the offers that you are requesting owner financing even though this way of financing is not listed on the MLS.
I have also bought rehabs (because I love rehabbing) with owner financing. The easiest way is to drive middle class, appreciating areas and look for run down properties, then go to your county courthouse (tax assessor’s ofc.) and get the name and address of the owner if they live out of the area. Then make a below market offer with owner financing explaining to the owner that it would reduce their capital gains liability etc. This is time consuming but it works. You might have to send out 50-100 letters before you get a response. As you’ve probably noticed, I am a traditional investor. If you want to use methods advised in the Guru courses or do L/O’s or flips someone else can explain this to you. Good luck.
Re: Seller Financing - Posted by scott
Posted by scott on July 22, 2001 at 22:36:42:
Lor,
I had just a couple of questions: I am begining
my rehabbing and have also thought about trying to buy my rehabs w/ owner finacing…but I was wondering…how do you re-sell you rehabs?? With a realtor? sell w/ financing?? or L/O?
Also, with owner financing, I assume you payoff your seller when you re-sell after fix-uP? Does your contract allow you to payoff seller anytime??
Sorry for so many???
Thanks for your input!!
scott,
Re: Seller Financing - Posted by Melissa
Posted by Melissa on July 22, 2001 at 16:42:27:
Thanks Lor for your advice!
Traditional investing sound so much better to me. All this “flipping” and other such stuff is so confusing and I worry that it just might be illegal in my state, (since almost everything is) or I will make such a huge mess at it will end up COSTING me $$$. I’m not a
business type person, but I’m not a work-a-day type either. I hope I can find my nitch. “Rehabbing” sound WONDERFUL to me!!!
Is there any books or other info sources about rehabbing or traditional real
estate investing that you could suggest?
Thanks again!!!
Melissa-Ca
Re: Seller Financing - Posted by Lor CA
Posted by Lor CA on July 23, 2001 at 12:17:56:
- “how do you re-sell you rehabs?? With a realtor? sell w/ financing?? or L/O?”
I always use a realtor for protection because I live in a full disclosure state. For example - I purchased a 2/1 house for 240K, rehabbed it and am putting it on the market next week for 599K. I added value but did not make structural repairs - for instance I have about 50K in dry rot around every west facing window that I am not repairing so I will disclose this fact to the buyer - so after the sale I feel I will have more protection since I went thru a realtor.
“Also, with owner financing, I assume you payoff your seller when you re-sell after fix-uP? Does your contract allow you to payoff seller anytime??”
Yes - I pay off the mortgage holder at the time of sale but I guess you could ask the seller if they wanted to finance your new buyer. Also, I would never ever sign a contract with payoff restrictions or a prepayment penalty.
Re: Seller Financing - Posted by Lor - CA
Posted by Lor - CA on July 22, 2001 at 17:15:22:
Sorry, I don’t know of any books but I’m sure there are plently out there. Check amazon.com. or your library. I learned by trial and error, plus I’m lucky, both my brothers are contractors (not that they ever give me a break but they do give me advice and suggestions). The first time I put a kitchen cabinet together it took me almost 5 hours but by the end of the week I was putting them together in 20 minutes. You can take free classes at Home Depot on saturdays in tile laying and all kinds of stuff to broaden your skill set.
I don’t believe that flipping or anything else mentioned on this board is illegal, but it’s true that it’s easier to work within your comfort zone at first. When starting out, don’t buy a house that needs stuctural work. Instead look for a property that just needs freshening up. Painting inside and out, new flooring, light landscaping. It is helpful if you are creative, can visualize and have an understanding what people want.