ARM - Posted by Lonnie

Posted by Ed Copp (OH) on May 01, 2000 at 15:17:18:

Get a copy of the ARM (adjustable rate mortgage) and read it carefully to see what adjustments are allowed and what they are based on. If there is in fact some back end profit here be sure that you do not end up giving the profits to the lender. I would strongly suggest using an escrow company to service the payment flow, for your protection…ED

ARM - Posted by Lonnie

Posted by Lonnie on May 01, 2000 at 11:39:35:

Received a call from a motivated seller the other day & he is interested in my L/O proposal the only problem is that he has conventional financing which is an ajustable rate loan. He has no equity in the home!He just bought the house last December. He would not give me a reason for selling! What to look out for when dealing with these type of loans & how do I protect myself. Anyone else ever did one of these deals & if so could you post your experiece. from talking with the seller over the phone I would not have confidence in letting them pay the loan.



Re: ARM - Posted by Terry (Dallas)

Posted by Terry (Dallas) on May 01, 2000 at 15:49:41:

What does the seller want? Anything down? Moving money? Nothing? Could you take the house over subject to with a CYA letter to better protect yourself? If you are worried about the payments being made then use the escrow company or at the least get the coupon book and call every month to verify that a payment has been made. Get an authorization letter to obtain information from the bank. As far as the arm you should probably have enough of a spread from your payment to the owner to the payment being made to you. If the arm goes up, get the info from the seller. then the rent goes up when you are able. Up front option consideration, monthly spread and the back end spread should cover any adjustments to the arm. The other question is are there repairs to be made? Who will make them? Get the owner to make at least two payments, We both want me to have time to find the right tennant don’t we?, before your first one is due.
I would try HARD to just get the deed from him so you have no liability.
Hope this helps

Re: ARM - Posted by Ed Copp (OH)

Posted by Ed Copp (OH) on May 01, 2000 at 14:23:13:

If he has no equity in the home it will NOT become more valuable just because you showed up. What is in the deal for you. If the seller will not tell you why he needs to sell, and you do not have confidence in him making the payments, I would be extremely cautious. Don’t get left holding the bag, especially if it’s someone elses’ bag…ED

Re: ARM - Posted by Lonnie

Posted by Lonnie on May 01, 2000 at 15:03:23:

I will be in it for the cashflow & the back end profits. I would L/o the house at current value & try to sell for 10 to 15K to my buyer. Also I would receive option consideration from my buyer. I can always call in & check to make sure seller is making the payments or I could make them my-self or a escrow Co. or whatever. The ARM is the only thing that is keeping me from going any further with this because I do not know what to look out for or if I just shouldn’t deal with it at all because of the ARM. Anyone with any knowledge, experience, or wisdom to share in regards to dealing with ARM please share

Thank You