first call on first ad - Posted by JA

Posted by JPiper on April 18, 1999 at 10:54:35:

Availability of 100% financing is widespread through lenders for owner-occupants. Credit must be good. Some lenders will make an institutional first and second that add up to 100%. Some lenders may require equity, but not a down payment…meaning the seller can carry a second to create the equity. Buyer is still financing 100%.

If the borrowers credit is not as good, a moderate down payment may be required, as long as the seller facilitates the transaction by carrying a second large enough to create equity for the buyer.

If you’re not familiar with lender financing get a good mortgage broker…find out.

The example I gave was with a buyer getting an 80% loan, the seller (investor) carrying a 20% note. This program is widely available for owner-occupants.


first call on first ad - Posted by JA

Posted by JA on April 17, 1999 at 09:55:58:

I’m running the “I Buy Houses” ad for the first time today. Just got my first call. From a man who is moving because he and his wife are missionaries. 3/2 home, 1400 sq ft, 1.5 acres, wood frame, good condition. Asking $42,500. Says he knows of a house down the street that sold for $60,000 that was not in nearly as good condition as his. He paid cash for the house 5 years ago. Now has a 7,000 equity loan. I asked him if he needed all his money now; he said he needed 25K now and could take the rest in payments. I need to do some research on the FMV of the property. What else? How can I convince him to take less cash? Thanks for any help. It sure is fun having people call me for a change!

Re: first call on first ad - Posted by mike

Posted by mike on April 18, 1999 at 10:31:23:

have you ever asked him why he needs 25k? lots of room to get creative here? keep up a dialog, you"ll find something. you dont have to low-ball him. the deal is good enough if you get a flexible seller who will go along with creative and win-win terms…

Bill & JPiper thanks for the great info - Posted by J.D. [Journey] Swindell

Posted by J.D. [Journey] Swindell on April 18, 1999 at 02:49:29:

This is just the type of info we, my husband [Jack] & myself are in need of. We have limited knowledge in this area, but have come up with a number of potential SFH we could buy/rehab/flip. Unfortunately we are not sure how to work the financing and we are to the point of looking for a partner so not to loose these potenital deals, so your examples will really be a help to us. Thanks so much, J.D. [Journey] & Jack Swindell

Re: first call on first ad - Posted by Bill Gatten

Posted by Bill Gatten on April 17, 1999 at 16:30:59:

Maybe I’m missing something here, but why wouldn’t you simply tell (ask?) the guy to refinance the property then take over the new loan payments (you increase your purchase price by the amount of his costs of the new loan). Your payment to him could then be based on, say, an 80% percent loan… his payments would be on a $25,000 loan. He ends up with his $25,000 and a good positive cash-flow, as well as a promise of another 20% (the approx. $10K equity not included in your 80% wrap) when you sell or re-fi it a year or two (or 2, 3, 4 months) down the road.

To entice him to do it your way ('can’t resist folks… sorry), you offer–for HIS safety, comfort and maximum protection–to place the property into a nice, safe trust in his own name, giving you only a temporary beneficial interest in it. This way, no title transfer to you (until you sell or re-fi) is ever necessary, and he needn’t take any chances with you, the property or its title. The property is thus shielded from all creditor and judgement liens, suits, BK’s tax issues, etc. There is no DOS violation… and if you turn out to be a bad guy, eviction and reposession is a thousand times cheaper and easier than any “seller-carry” arrangement.


Re: first call on first ad - Posted by JPiper

Posted by JPiper on April 17, 1999 at 11:42:55:

Right now of course you need to verify a lot of things?to include the condition and market value.

But IF this house is really worth $60K, and needs little repair?.this could be a very nice deal. What if you tied the property up for let’s say 45-60 days, marketed the house retail for $60K?.100% financing? The new buyer gets a loan for $48K?you pay the buyer let’s say $35K all cash?simultaneous close. You’re left carrying a $12K note and have $13K in your pocket.

Another alternative would be to agree to pay the seller his $25K, if he would agree to subordinate the balance?let’s say $15K to a new first mortgage in the amount of $30K. Borrowing $30K against a $60K property can be done all over town?.just don’t call the bank. Now you sell for $66K on a wrap?with $6K down?financing the remaining $60K Now you have $11K in your pocket, plus additional equity of $15K represented by the difference between your loans of $45K and the new wrap of $60K. The seller has his $25K plus a note for $15K.

Lots of ways to do this deal. But verify the market value and condition of the property.


Re: Bill & JPiper thanks for the great info - Posted by Bill Gatten

Posted by Bill Gatten on April 18, 1999 at 13:59:50:

Listen to me…not JPiper. He’s one of those guys who has all the experience, alway has the facts, and always makes things wayyyy too simple and too easy. Me? ask me what time it is, and I’ll teach you to build an alarm clock.

In all candor, on this one…take Jim’s advice.


Re: first call on first ad - Posted by JPiper

Posted by JPiper on April 18, 1999 at 11:29:22:


Couldn’t resist pointing out that not EVERY deal has to be a PACTrust deal. It seems to me that you’re stretching here to make this one.

Let’s say you meet with the seller, tell him he needs to get a new loan to produce his cash, and now you jump through those hoops explaining how he doesn’t have to worry about his safety or comfort because you’re going to put the property in a trust. Thereafter he won’t need to worry about the bankruptcy of his co-beneficiaries, it’s not partitionable (?), no DOS worries, judgments don’t attach, etc etc.

Next, I meet with the seller. I tell him I’ll offer cash, but I need 45 days to close. Clearly here he’s not worrying about ANY of the issues that you’re telling him he doesn’t need to worry about, because he’s out of the deal when I close. Nor am I as the investor worried either, because I am putting cash in my pocket, and possibly carrying a second which helped to facilitate the new buyer’s loan. The new buyer isn’t worried because he has 100% financing, a combination perhaps of an institutional first, and an investor carried second. I’m not worried about judgments, bankruptcy, etc because I have a secured interest in the property as the investor, but if I decided to worry I could sell my second albeit for a sharp discount.

Obviously since I’m telling the story here I’m going to end this one by saying that my guess is the seller is going to take my offer rather than yours in this particular case. It’s cleaner and simpler.

I have to say that it takes a pretty good salesman to get a seller to refinance to pull cash, and then take the loan over. Not that it can’t happen. Guess what I’m saying is that when I’ve suggested this to sellers the idea has failed miserably, or it couldn’t happen because the seller was in financial trouble.

Nothing at all by the way against the PACTrust?.I just don’t think it’s the best solution is this particular case.


Oops… - Posted by JPiper

Posted by JPiper on April 18, 1999 at 10:57:17:

The new buyer gets a loan for $48K…you pay the “seller” (not the buyer) $35K. Sorry for the error.


Re: first call on first ad - Posted by Mark (SDCA)

Posted by Mark (SDCA) on April 17, 1999 at 19:57:45:


I am not sure I follow your first scenario. If you are offering 100% financing then why is the new buyer getting a new loan??



Re: first call on first ad - Posted by Bill Gatten

Posted by Bill Gatten on April 18, 1999 at 13:52:42:


Good point (OK, excellent!); however, the key element (for me) in the post was the query (as it were): “How can I get him to take less money?”

I have to admit, your advice on this one was the best of all, assuming this buyer has the wherewithall to do what you say, without the seller’s involvement. I didn’t get that feeling, and was merely trying to point out another (albeit, 2nd best) alternative.

I’ll admit, my second paragraph was purely a PFA.* However, on the issue of the PACTrust, you must remember that I teach it, write about it, eat it, drink it, sleep it, live it, dream it and roll in it naked on weekends when no one is looking (somewhat less than a pretty sight). I could see a Guppie trying to pass a cork, and find a PACTrust in there somewhere.

I have used the PACTrust so many times on otherwise impossible deals, that someone could walk up and hand me the Grant Deed to the Golden Gate Bridge for free, and I’d immediately try to fit it into a PACTrust somehow.

Some may call this single minded, opinionated, one-track, unilateral, closed off compartmentalized thinking. However, Jim, I prefer to think of it as being… um… well… “The best dad-blamed Chili at the Cook-Off (so to speak).” Sure… some Chili might be tastier, but too hot; others might be more savory, but too chunky, or not chunky enough; and still others, perhaps “USED TO BE” championship conconctions–until the day my own mouth watering, uvula twitching, Mother of all Chilis Con Carne was introduced. [Did you mention “stretching”?]

OK, so you’re right on this one; however, I must say that I haven’t had trouble getting OTB* sellers to refinance prior to entering a seller carry deal with me. That’s because I know that its a seller-carry before I start, and I don’t suggest that they do it for MY benefit… (I bring it up solely as a solution to THEIR problem, not mine) I suggest that since we are going to do the deal anyway, that they might as well refinance for the maximum (Since I’m the one paying for it all)… before I take over.


*OTB: “Over the Barrel”
*PFA: "Plucked from Air