Posted by soapymac on June 05, 2000 at 13:27:29:
I am going to quote your original post, then my reply.
“I’m trying to work on a deal here. The seller owes 31,000. He’s leaving the country and is willing to just let me take over the payments. The mortgage payments are 423.00 a month.”
Does this include PITI? What is the value of the home? Have you done comparables (“comps?”) How many payments are remaining? What is the interest rate on the present loan? What is the condition of the house? What repairs need to be done?
“The mortgage co. does not allow to assume loans.”
Why? Because it would possibly trigger a “due on sale” clause? Is the mortgage assumable?
“I want to just make the payments without transferring the loan on my name.”
Again, why? What is your motivation for this? Bad credit? No credit? Do you need to hide this transaction, and do it legitimately?
“What kind of contract can I use? The seller will give me the mortgage info and I’ll make payments every month.”
Is the seller aware that his/her name would still appear “on the books” as far as a credit check of THEIR credit is concerned? Do they want that? Do you want that?
“I have a buyer for the home willing to give me 1200 dollars down and pay me 730.00 a month which is 300 dollars above the mortgage payments. My question is what kind of contracts do I use,…”
Wait a minute, here. Are you figuring that $300 difference as PROFIT? What about the questions I asked before? You see, up to this point, it looks like you may be thinking a “contract for deed” situation BUT,
“and how do I set it up without having the loan on my name, since I don’t want to be responsible if the buyer defaults?”
If the buyer defaults? Sounds like this just changed from a “contract for deed” to a “simultaneous closing” situation. Do you have a title company and/or attorney that would be willing to do that? Would the purchaser qualify for a mortgage on their own account? If they can’t, and you are concerned at the outset whether or not they can continue to make payments, then if they can’t qualify for a loan…doing a simultaneous close won’t work, either, at least with this buyer.
“If I just sign contract with seller, to make his payments, what happens to the title after mortgage is paid off?(10 years)”
Why do you want to increase his equity by making the payments, when you don’t want anything in your name? How are you going to prove you have an equitable interest in the property? The only way I know to protect yourself in this instance, would be to file a Memorandum of Understanding against the present mortgage. You could, as part of your process of taking over the payments, have the seller give you a quitclaim deed turning over to you all his interests in the property. That way, when the mortgage is paid, you take the mortgage in his name plus the quitclaim deed and use those items to re-title the house in your name. The problem is that if you take this avenue of protection, you can not offer to YOUR buyer a clear title on a contract for deed.
“What about insurance on the home, who will get paid if something happens?”
Rachel, with respect, you shouldn’t even be thinking about this aspect until such time as you detemine what you want out of the deal…and structure it in such a manner as have the ability to grant to your purchaser clear title.
So the question becomes a matter of focus: you want to tie the property up, do a simultaneous close for the profit and go look for another one? Or do you want to do a contract for deed, where you have a continuous cashflow that would increase after ten years? Once you figure out what YOU want to do, the answer to your “problem” will become obvious to you.
Whichever way you go, good fortune to you.