Re: creating a note and selling at the closing table (Long) - Posted by Paul_NY
Posted by Paul_NY on January 23, 2000 at 14:22:05:
I’m going through the same situation right now.
My buyer has agreed to put 5% down. Getting a down payment is by far the most difficult part of this process.
I have sold notes before, but only after the buyer paid on it for more than three months (aka ‘seasoning’).
When doing a simuteneous close you will be asked to discount your note more than if it were seasoned.
Read the following article which appears on this site:
Creating A Time Machine
I have created a time machine.
Just think back to the remember when days… remember when you could buy a house for $6,500, hold on to it for a few years and sell it for $30,000…if I could do that now I’d buy ten. Well I’m here to tell you. You can. I just did. The city was Baltimore, but the location can be anywhere that inner city decay is prevalent: Board ups, drugs, high crime etc, exactly the place everyone expects to find a fortune…
The method has 4 steps (Courtesy Robert Allen) 1/ Find it. 2/ Fund it. 3/ Fix it. 4/ Farm it.
1/Forclosures, Delinquent Taxes, REO’s etc.
2/Seller held financing from tired landlords, REO Depts. or credit cards.
3/Fix it to FHA minimum standards. Get a copy from an appraiser.
4/Farming it or selling it to some of the inner cities’ poorest eligible inhabitants is the essence of my money making idea. FINANCING IS KEY.
It is one thing to fix the property to FHA standards, but quite another to sell it that way. The process is slow and tedious and many good people don’t quallify. Often it is for lack of funds that cannot be overcome by seller assistance above the 6% level.
So, What to do?
BE THE BANK… But you say, "What about the Due on Sale clause or that credit card debt?"
The answer is to create a note to sell the house and at the same time sell the note to create the cash to close.
A couple of months ago I posted an entry on this site titled “A Noteable Question”. I asked if it was possible to create a note on a property I was selling and then to simultaneously sell it to an investor at the closing table. The answer was YES.
I chose Mike Jones from Mid South Funding to work with and he showed me how to write the contract, structure the deal, the terms on the note, etc. This is what we came up with: Sale price $30,000 First trust of $24,000 @12% x 20yrs 2nd Trust of $4,500 @12% x 20yrs balance paid as down payment.
$24000 @ 12% x 20 yrs = $264.26
$ 4500 @ 12% x 20 yrs = $ 49.55
The first would be sold at a discount to produce a yield of 13.8% ($21,500) This would pay off our $8,000 release on the blanket mortgage we have on the ten properties, provide the funds to close including the seller assistance that FHA wouldn’t have allowed and still leave us with a balance of $11,396.03 and the 2nd trust of $4,500. Not bad for a $6,500 investment and about $2,000 worth of fix up.
The Buyers too are happy. They have a decent home with monthly payments of $314 plus taxes and insurance, on a property they would have had to pay $400 to rent.
In conclusion, I believe my time machine is unique. Investors have overlooked the possibilities of our inner cities and its residents as an opportunity to create wealth and bring back those communities. This system is very workable. I have done it and continue to use it. The profit potential is only limited by the original cost of the house and how many you can complete in a year. Good Luck.
Regards Howard Hudson.
Good article eh?
Here is a list of items to collect in the meantime.
- Closing statement (proposed if this is a simultaneous closing)
- Real Estate Lien Note
- Deed of Trust or Mortgage (recorded-w/recordation numbers on it)
- Warranty Deed (that has been recorded-w/recordation numbers on it)
- Amortization Schedule (if you have one)
- Fire and Hazard Insurance Deceleration page
- Mortgagee Title Policy, if you have one , or Owner’s Policy
- Payment Verification for the immediate past 12 months i.e., copies of deposit slips from the Bank or Institution or, end-of-month Bank statement
- Pictures : 4 to 6 pictures of the front, side, back and some street shots of the surrounding area (for all commercials we will need 24-36 pictures, anything that will help sell the deal, all amities on property and near by)
- City and street maps
- Plat map and Survey, if property is in a rural area
- INFO. on Buyers, i.e., social security numbers, Home & Work address & phone numbers.
- Credit Report on Buyers
- Information on property, i.e., 3 bedrooms, 2 bath, fenced, 2 car garage, on 1 acre, with fire place, well, out buildings and city population
- Tax certificate from your local tax appraisal office
- Copy of the Mobile Home Titles
- If this is a second lien position note, we will need copies of the First lien and Deed of Trust, and the name and address and account number and phone number of the First Lien holder.
- Any other information you feel is pertinent to the deal.
- ANY AND ALL OTHER INFORMATION TO HELP SELL THE DEAL!
email me with any other questions!
Best of Luck