Wrap Question - Posted by Reif

Posted by JPiper on December 26, 1998 at 13:48:18:

Qualifying prospects for some form of owner finance starts with cash upfront?.at least for me. By this I don?t necessarily mean 20% down. What I mean is an amount of cash that is important to them?.that they wouldn?t want to lose. This amount is generally 100%?..that is, 100% of what they have. This will be an important amount of money to the buyer?.and that?s where I start. I want 100% of what they have, subject to a minimum condition of what I want.

I look at other things. Is the prospective buyer honest?? This is at the top of my list, right next to cash. How do you know?? You ask questions that you can check out regarding credit and past residences. If they lie or shade the truth, be careful?.they may not have accepted the responsibility for their situation. I like dealing with people who are mature enough to accept their responsibility for their lives.

I also look at the prospective buyer?s priorities. Does his credit problem stem from credit cards?? Has he effectively handled his rental payments despite this?? Some people with bad credit pay their rent but don?t pay the credit card. This works for me.

As far as how you foreclose on the wrap, this needs to be answered by you and your lawyer according to the laws that exist in your state. If you haven?t assessed your risk with a qualified legal opinion in your area, you have NOT done your homework.


Wrap Question - Posted by Reif

Posted by Reif on December 26, 1998 at 09:04:57:

When you sell to someone on a wrap, how ‘qualified’ do you think they ought to be? Obviously, they are not going to be ‘bank’ qualified if they are willing to pay a premium interest rate.

Second, after selling on a wrap, is it harder/easier to foreclose if they don’t make the payments? How long does that process take?

I’m trying ascertain my risk on selling on a wrap.



Re: Wrap Question - Posted by Tim (OH)

Posted by Tim (OH) on December 26, 1998 at 14:01:50:

I agree with what JPiper advises and the criteria I go by in analyzing a prospective buyer are “willingness and ability to pay”. I didn’t make this up, it seems to be a basis that a lot of investors use. I just thought it would give you some focus in what you’re looking for.

Willingness is demonstrated in JPipers example by the fact that the tenant/buyer may have postponed credit card payments and kept the rent/mortgage current. Ability would be defined by stable job and sufficient income, after expenses, to make the required payments.

Hope this helps.