Seller Financing: Where down payment comes from? - Posted by Ryan (NE)

Posted by JohnBoy on November 15, 2000 at 12:13:58:

Because they are “MOTIVATED” and they “NEED” out from under their mortgage payment. If they could have found a buyer on their own then chances are that I would have never ended up meeting with them in the first place. In most cases, by the time I enter the picture, they have already tried selling on their own and a lot of times have tried selling by listing with a realtor. They weren’t able to sell and now they are “MOTIVATED”! They don’t have many options left and are willing to do anything to get out from under the property. On a “subject to” deal, they are stuck on the loan until I pay it off. I agree to take the loan over starting in 60 days from the contract date, but they will remain liable on the loan until it’s paid off. The loan remains in their name.

If you aren’t in a position to financially take over their payments unless you have someone to put in the property, then you make the deal subject to you finding a suitable teanant/buyer first, within 60 days. That way if you can’t find someone to put in the property you can either walk away or get the seller to extend the contract for another 30 - 60 days while you continue to find someone. If the seller is worried about you not finding someone, you can always set the deal up to where IF they find someone else to buy it before you find someone, they can sell it to that person. Under that arrangement, what do they have to lose?

To figure out what the home is actually worth you need to run comps (comparable homes that have sold in that neighborhood within the last six months). Don’t go by what homes are being listed at, you go by what they actually SOLD for within the last 6 months.

Seller Financing: Where down payment comes from? - Posted by Ryan (NE)

Posted by Ryan (NE) on November 14, 2000 at 16:28:54:

I have a classified ad running for fixer-uppers and am getting quite a few calls. Many sellers are wanting to finance the deal but want a down payment. Just wondering if, I am wanting to keep a property long term where would the down payment come from? All of my equity is tied up in other deals. So I am wondering where some of you are getting the down payments in your deals???


Ryan (NE)

Seller Financing: Where down payment comes from? - Posted by JohnBoy

Posted by JohnBoy on November 14, 2000 at 17:23:33:

For the most part, when the seller is financing the down payment, if any, comes from your buyer, be it a tenant/buyer that you L/O the property to and use their option consideration as your down payment, or be it selling on a contract for deed where you would use your buyers down payment to cover any down payment you may need. Typically, when ever a down payment is required by you, as the investor, they should be smaller amounts ranging between $1k - $2500. If you’re dealing with “Motivated” sellers, then this shouldn’t be a problem. The problem where higher down payment amounts would be required are usually if the seller is NOT very motivated, if not motivated at all.

So if I found a property where the seller was “Motivated”, but they NEEDED something (packing money) and I HAD to give them say, $2500 down, I’d get the $2500 from my buyer that would be putting $3500 - $5000 down to me and I’d pocket the difference as my up front profit, plus a monthly spread on the cash flow, and a nice profit on the back end when they refinance to pay me off. If for some reason they don’t follow through and end up leaving, then I just start the process all over again collecting another down payment, a higher monthly payment for a larger cash flow and higher selling price for a bigger payday on the back end. The process just keeps repeating itself over and over again until someone eventually follows through and buys the property. If and when that happens, you just find another property to replace it with and start over again!

Seller Financing: Where down payment comes from? - Posted by Tobe

Posted by Tobe on November 14, 2000 at 18:17:41:

Boy, that sure sounds easy. Maybe a little too easy. What if you can’t find a buyer for say, 3-4 months. Poor old Ryan will be paying out the rear. Unless, he doesn’t mess with deals until a buyer is found. That sounds pretty hard to me. But, I’m a nobody so who cares?

Seller Financing: Where down payment comes from? - Posted by JohnBoy

Posted by JohnBoy on November 14, 2000 at 18:27:35:

Actually, it’s VERY easy. It shouldn’t take at most, 60 days to find a buyer. Remember, you’re not selling the conventional way, you’re offering TERMS. TERMS SELL FAST! To avoid getting stuck with something in the event you couldn’t find a tenant/buyer, then just tie up the property for 60 days making the contract “Subject to Buyer finding a suitable tenant/buyer within 60 days”. If for some unforeseen reason, you couldn’t find a buyer within 60 days, you can renegotiate the contract to extend it or walk away!

“Subject to” contract question - Posted by Matt

Posted by Matt on November 15, 2000 at 10:20:48:

My question is: Why would someone agree to the subject to contract when it ties them up for 60 days while you are trying to find a buyer? Couldnt they find a buyer also, and you’re not giving them any money until you find a buyer right? So in effect they are stuck with the property. loan, etc. unitl you, the investor, finds a buyer, right? Please let me know, since I am very interested in doing this same thing and am in the process of looking for a property to do it on, but I don’t want to get burned my first time out. Also, how do you derive the value of the homes you buy? Thanks in advance for the help. Matt