Posted by Tom on February 13, 2001 at 01:43:56:
thanks johnboy, i probably wouldn’t have caught that till tuesday eve.
HELP ON POTENTIAL 1st DEAL - Posted by TOM
Posted by TOM on February 12, 2001 at 21:17:52:
FIRST OF ALL, THX TO ALL WHO POST HERE. YOUR GUIDANCE HAS BEEN WONDERUL. I’VE BEEN AT THIS FOR ABOUT 1 WEEK. I JUST GOT MY 1st RESPONSE FROM MY $50/WK. AD IN THE LOCAL SUNDAY PAPER. I WOULD APPRECIATE SOME INPUT, JUST TO VERIFY HOW I’M THINKING ABOUT THE SITUATION. THIS MANUFACTURED HOME (97), IS ON A 1/3 ACRE LOT IN A RURAL AREA. THIS PERSON HAS OWNED SINCE IT WAS NEW. HERE’S THE SPECS; 1997, WITH 1335 sq.ft., IT WAS APPRAISED IN SEPT. FOR 110,000. PAYOFF ON 1st. IS 76,000. PAYM’T IS 826 PITI. I WOULD SURE APPRECIATE ALL THE HELP I CAN GET. THX TOM
Re: HELP ON POTENTIAL 1st DEAL - Posted by Jack/TCG
Posted by Jack/TCG on February 12, 2001 at 21:52:53:
Hey Tom, you lucked out. JohnBoy will give you some of the best advice you’ll ever get.
Look forward to talking with you tomorrow as planned. 
—Jack
Re: HELP ON POTENTIAL 1st DEAL - Posted by JohnBoy
Posted by JohnBoy on February 12, 2001 at 21:39:38:
FIRST THINGS FIRST! TURN OFF YOUR CAPS! NO REASON TO YELL! BESIDES, IT’S HARD ON THE EYES!
There, now isn’t this a lot better? You can take of your sunglasses now. LOL
Why is the seller selling? What is the seller asking? What does the seller NEED??? Why? Does he need any cash out of this? If so, what for? What will he NEED it for? Forget what they WANT, what do they NEED? Is he MOTIVATED? What is the PROBLEM he’s having that he NEEDS to sell this thing?
The only thing you’ve given us is that the place was apprasied for $110k and the pay off is $76k. That tells us nothing except that their “might” be around $34K potential equity in the property. Does the seller want or NEED to get any of that equity out of this? If so, what does he NEED it for? Does he NEED it ALL NOW? Or can he wait a few years to get it? What does the seller NEED? Debt relief? Cash? What?
Re: HELP ON POTENTIAL 1st DEAL - Posted by Tom
Posted by Tom on February 12, 2001 at 23:08:43:
THX JohnBoy for your reply. it seems to me that they are very motivated. all they seem to need is out of the mortgage and maybe $2,000 to pay off the dad.they have renters in there now but seem to make partial payments sometimes. Suggestions??
Re: HELP ON POTENTIAL 1st DEAL - Posted by JohnBoy
Posted by JohnBoy on February 12, 2001 at 23:38:13:
What is the $2k owed to dad for? Is this tied to the property in some way or is this just other monies they owe dad and would like to get squared away on?
If they have renters in there then you will need to deal with getting them out. For $30k in equity that’s not a bad deal to have to deal with. The problem is that you will need some cash on hand to deal with this issue and cover the payments until you get them out. If you have some cash to work with then you should be in good shape there. You could also set the deal up to where your payments won’t start until you get the renters out. That will depend on if the sellers can maintain the payments while you’re doing this, if they can’t then you will have to deal with this.
You said the property was appraised back in Sept.? Did you SEE the appraisal? Was it appraised by an appraisor or are they going by what a realtor told them it would be worth and calling that an appraisal? You need to run some comps and verify the value.
This would be a good deal to take over “subject to”. You just assume their loan without qualifying through their lender. You would have the seller deed the property into a land trust naming themselves as the beneficiary of the trust. Then have them assign their beneficial interest over to you. Once you have the deed then run a title search to verify that no other liens are against the property. Then try and deal with getting the renters to move out! You might offer them $500 if they just pack up their stuff and leave and avoid having an eviction on their record! If they go for this, DO NOT give them ANY MONEY until AFTER they have everything moved out and loaded on a truck. THEN and ONLY THEN, you give them the money! This would be cheaper than having to go through the eviction process and get them out quicker! Then you can record the deed taking title to the property.
Have the seller wait until you get a new tenant/buyer into the property before having to pay them the $2k! This way you can lease option the property getting $5k down as “non-refundable option consideration” OR sell on a land contract getting $5k - $10k down and use your tenant/buyers money to pay off the seller their $2k and pocket the difference as your up front profit!
Then create a nice monthly spread on the payments your tenant/buyer pays you vs. what you pay to cover the existing payments!
Re: HELP ON POTENTIAL 1st DEAL - Posted by Tom
Posted by Tom on February 12, 2001 at 23:50:29:
johnboy, i think the 2k was what they borrowed from dad to get the place bought in 97. i haven’tseen the property yet. it’s about a 100 miles from where i live. i’m not sure i quite understand how i assume their mortg. when its not assumable. what for and how much $ do you think i’ll need. this would be my 1st deal and i don’t want to mess it up. sorry if i seem so dense
Re: HELP ON POTENTIAL 1st DEAL - Posted by JohnBoy
Posted by JohnBoy on February 13, 2001 at 24:18:20:
The mortgage probably isn’t assumable. That’s why the purpose of having the seller deeding it into a land trust. Once the property is deeded into a trust, it becomes owned by that trust. Federal Law prohibits a lender from calling a loan due on residential property that is deeded into a land trust by the borrower as long as the borrower remains the beneficiary of the trust. Once the trust is set up naming the seller as the beneficiary, you then have them “assign” their beneficial interest over to you which makes you the new beneficiary of the trust. This assignment does not get recorded, it only gets notarized, meaning the “assignment” is kept silent and out of public records. Therefore, if the assignment is kept silent and out of public records, then HOW could the lender ever find out you informally assumed their loan??? Are you going to TELL THEM? Is the seller going to tell them? Heck no! This is how you assume non-assumable loans without going through the lender to do so. You just assume it on your own without telling the lender you are assuming it!
The reason for having the seller name themselves as the beneficiary of the trust to begin with is, because if the lender ever found out about the property being transfered into a trust they “may” ask to see the actual trust agreement. What they are really wanting to see is who is named as the beneficiary of the trust. If this were to ever come up, you can just let them see the trust since the seller will be shown as the beneficiary and satisfy what they’re looking for! What they won’t see is that the seller “assigned” his beneficial interest of the trust over to someone else. That’s because the assignment is done using a seperate form that never gets recorded anywhere and only you and the seller know about it! Now why in the world would you or the seller ever want to TELL the bank about this??? As long as you make the payments on time each month then their should never be a problem.
Remember, banks are in the business of loaning money to make a profit. They’re not in the business of owning houses that sit on their books as non-performing assets that would be costing them money. If the payments are being made then they are happy campers! They’re not going to incur the cost of calling a loan due when the payments are being made on time and risk a good paying loan turning into a non-paying loan for up to a year while they go through a judicial foreclosure process to take back a property because someone else is making the payments on time every month!
The only other time a bank may try and call a loan due is if the loan is at a very low interest rate and current rates have sky rocketed to where they feel they could make more by foreclosing and reselling the property so they could loan that money out at a higher rate. Even if that were to ever happen, most states take up to 9 - 12 months to foreclose on a property. Do you think you could resell it within that time frame and pay off the underlying loan??? OR, if you could qualify for your own mortgage you could just refinance it yourself and pay off the underlying loan.
Re: HELP ON POTENTIAL 1st DEAL - Posted by Tom
Posted by Tom on February 13, 2001 at 24:27:59:
thx johnboy, one last ? on this subject and i’ll be done. would you have any problem with distance ( 100 miles from home) and can i check if there are other leins before this trust is set up?
Re: HELP ON POTENTIAL 1st DEAL - Posted by JohnBoy
Posted by JohnBoy on February 13, 2001 at 24:58:11:
As far as being 100 miles from home is concerned, that pretty much depends on what you plan to do with the property. I wouldn’t want to deal with just having a rental property that far away, but selling on a L/O or a land contract where the buyer is responsible for all maintenance and repairs I wouldn’t have a big problem with it.
On a property with this much equity involved you could also offer to sell it with owner financing where you as the seller would agree to carry back a small second mortgage to help the buyer qualify for a new first mortgage. Say 10% as a second where your buyer could get 90% financing with decent credit. This would allow your buyer to buy with 100% financing. There are lenders that have programs like this for people with decent credit. At closing you would get 90% of the selling price which out of that they would pay off the underlying loan leaving you with the difference to put in your pocket and you would have 10% of the selling price as a second mortgage that you hold against the property that the buyer would make payments to you on. This way your in and out of the deal with a nice cash profit plus a small income stream off the 10% second mortgage. You’re no longer involved as a seller, your a lender that holds a second mortgage just like the bank that holds the 90% first mortgage. No landlord headaches to deal with!
If your buyer ever defaulted on his payments to you, you could foreclose on him and take the property back if you wanted too! Of course you would have to make the payments on the first until you sold it again, OR, you could try and get something from your buyer out of it by discounting the amount he owes you instead of having his credit ruined, or whatever to you may decide is best for you. You could just forget about if they stopped paying if you wanted to. What ever you decide, it was all basically free money to you to begin with!
You could have all the paper work done up and get it all signed off by the seller, just DON’T record it until after you check title. If something shows up that would prevent you from wanting to do the deal then just tear up the paper work and the deal is off!
If you will need to pay an attorney to do the paper work for you on this, then check title first before spending the money on the attorney to draw everything up first.
I would check out Bill Bronchick’s course, “Nuts and Bolts of Creative Real Estate Transactions”. He IS a real estate attorney that specializes in creative real estate. This course of his will give you every type of real estate contracts, lease option forms, trusts, leases, mortgages, trust deeds, etc. that you will ever need in this business. It’s WELL worth the money considering you would pay an attorney to draw up just one contract for the price of this course that gives you all the contracts you will ever need.
You can check it out at this link:
http://www.creonline.com/c-131.htm
Also click on the “legal corner” link at the top left side of this site. He has a lot of info there. Also look for his articles in the “How To” section on this site. He has some that talks about “subject to” and the “due on sale clause”.
Re: HELP ON POTENTIAL 1st DEAL - Posted by Tom
Posted by Tom on February 13, 2001 at 01:10:13:
thank you very much johnboy, you’re a lifesaver. i’ll let you know how it works out
Re: HELP ON POTENTIAL 1st DEAL - Posted by JohnBoy
Posted by JohnBoy on February 13, 2001 at 01:35:51:
You might want to hurry on this one. I just seen a post on the main newsgroup that sounds just like your deal here and if it is they are headed over there first thing in the morning.