Creative Fianancing and Buyer Benefits - Posted by Evelyn


#1

Posted by ke on October 27, 1998 at 10:58:19:

When our seller died, we continued making payments to the heirs. Fortunately, we had been making payments to the daughter for a while anyway since she was handling her mother’s finances and had “power of attorney” regarding her mother’s affairs. We just continued to make payments to the daughter until she turned over everything to her brother after sellers death. He was in contact with us and had his attorney handle everything when it was paid off. Our attorney, who originally handled the closing 10 years prior, was sent the documents, basically to record it in the County (of sale). There are other concerns, as well, check out my answer to above question on “seller financing/installments or Land Contract.”

good luck.


#2

Creative Fianancing and Buyer Benefits - Posted by Evelyn

Posted by Evelyn on October 26, 1998 at 23:48:52:

Hello everyone,

I have yet another question. First, let me say that as I was going through the messages to see what sounded interesting, my husband was reading them. He was very impressed. He said, “man, these guys do this like they were playing chess.” I thought you’d like to know that you are ALL very impressive. And I enjoy reading your responses and questions in order to learn.

I actually have several questions. Re: Owner financing. I am trying to acquire this property which will be owner financed.

  1. How do my monthly payments become updated or even put on credit reports for the improvement of my credit status?

  2. Would I be able to use the equity on the house as payments are made?

  3. Would this property be considered legally a property that I have purchased?

  4. These buyers are older, and unfortunately they won’t be around for the term of the loan. What happens in that situation, should I be adding a clause to protect myself from family members that were not initially in the negotiation process?

Thanks to all in advance.

Waiting anxiously for your replies.

Evelyn


#3

Re: Creative Fianancing and Buyer Benefits - Posted by Bud Branstetter

Posted by Bud Branstetter on October 27, 1998 at 16:49:13:

Evelyn,

Good advise on the posts below. One additional comment from an investors point of view. Almost always the seller will take a discount in the future on the note they carry. How much and when will depend upon certain skills and approaches. The heirs are even more likely to discount. Get your credit picture in order so that you will be able to take advantage of the discount at the right time.


#4

Re: Creative Fianancing and Buyer Benefits - Posted by Eduardo (OR)

Posted by Eduardo (OR) on October 27, 1998 at 12:40:42:

Evelyn–

I would always, and especially in a case like this where the sellers are elderly and may kick off at any time, use a collection escrow account at a title company for owner financing. One of the main reasons, besides having a neutral third party keep track of the payments and making sure they are properly disbursed, would be to have a deed of reconveyance signed by the sellers (if you’re using a trust deed) or a satisfaction of mortgage (if a mortgage) held in escrow for recording after you pay off the loan. Suppose they died and the heirs tie up the estate (or whatever) and you couldn’t sell the property until jumping thru hoops. Just a prudent procedure that does not preclude any creativity on your part along the way. --Eduardo


#5

Re: Creative Fianancing and Buyer Benefits - Posted by Ed Wachsman

Posted by Ed Wachsman on October 27, 1998 at 03:18:18:

I am trying to acquire this property which will be owner financed.

  1. How do my monthly payments become updated or even put on credit reports for the improvement of my credit status?

Unless the seller is a company or other entity that already has a relationship with a credit bureau it is highly unlikely that your payment history on this purchase will become part of your publicly accessible credit history. It will serve you well to make your payments from a checking account and keep both the canceled checks and the account statements in a safe place to demonstrate your good payment history when needed. A properly prepared amortization schedule couple with your canceled checks can help both parties keep track of the ongoing balances.

  1. Would I be able to use the equity on the house as payments are made?

You make reference to buying with seller financing. However, you don’t say whether they are financing the entire purchase via a land contract or note and mortgage or whether they are merely financing part of the purchase with a second mortgage. The implication of your questions suggests that they are providing a first through either a land contract (in which case it will be virtually impossible to use your equity with institutional lenders because will you not have title to the property) or a note and mortgage (in which case you can more easily access your equity since you will be in title).

  1. Would this property be considered legally a property that I have purchased?

IF YOU DO THE PAPER WORK CORRECTLY, the answer is yes. I STRONGLY URGE YOU TO BE REPRESENTED BY A GOOD REAL ESTATE ATTORNEY. THIS SOUNDS LIKE AN ACCIDENT WAITING TO HAPPEN.

  1. These buyers are older, and unfortunately they won’t be around for the term of the loan. What happens in that situation, should I be adding a clause to protect myself from family members that were not initially in the negotiation process?

I’m assuming you mean the “sellers” are older. I am not an attorney, but I can’t imagine a scenario where the seller’s heirs would not be entitled to the seller’s interest in the property according to whatever will and/or law will govern the matter. However, the heirs also will inherit and be governed by whatever land contract or note/mortgage you originally sign. They cannot change any of the terms without your consent. Life, in theory, should go on as if nothing had changed. Again, this is one of reasons I strongly urge you not to proceed without good legal representation. If the seller has an attorney you must not rely on that attorney. You must have your own.


#6

Re: Creative Fianancing and Buyer Benefits - Posted by Rob FL

Posted by Rob FL on October 28, 1998 at 06:09:43:

You may want to put a clause in the mortgage of a right of first refusal if the mortgage is ever assigned. That way you get first shot at any discounts offered.


#7

Working with the heirs - Posted by John Behle

Posted by John Behle on October 27, 1998 at 19:39:58:

Remember, you can always work with the heirs individually too. One might take cash, another might take a trade of another note, etc. Let’s say there were two heirs. One wants to discount and the other doesn’t. You could obtain a discount from the one, and get the other to subordinate (maybe for a little cash) to a new loan to pay out the “discounted” heir. The options are only limited by the creativity.

A trade would look like buying a similar note at a discount and then trading it to them (substitution of collateral - note for the property). You still get your discount - even though the heirs didn’t take one.