Re: Have a Question - Posted by JohnBoy
Posted by JohnBoy on March 09, 2002 at 15:44:06:
Sure, it’s possible. The only problem is that title remains in the seller’s name until the contract is paid off. Meanwhile you are stuck to deal with any potential liens being recorded against the property caused by the seller and dealing with any potential problems should the seller file BK. You can record a performance mortgage to protect your interest, but then you would still have to foreclose on that to get clear title if the seller was unable to take of any liens recorded behind your performance mortgage.
By getting the deed you eliminate all that because YOU are the owner. You can put a clause in your contract that would allow the seller to be able to get the property back from you by giving them an option to buy it back from you for $10 if you were to ever default on the payments being made on their loan.
If you were looking to assign a deal to get in and out with a quick profit then I like using a contract for deed or a L/O to buy on and then assign my contract to my buyer by getting their down payment as an assignment fee. That way I’m not putting the seller at any risk by allowing someone else to have legal title to the property while the seller’s loan remains in place. The seller would retain legal title and would have recourse to get the property back easier should my buyer default on their end.
I can offer the property by advertising something like:
NO BANK QUALIFYING!
$5k Down and Just Take Over Payments!
Nice 3 bed / 2 ba House
There are lots of ways to do deals like this depending on what your goals are with the property.
If I’m buying where I plan to remain in the deal then my first choice is to get the deed. If that is a problem for the seller then I would consider buying on a contract for deed or a L/O depending on how the numbers pencil out and how I would need to sell to generate the best profit. If selling on a L/O wouldn’t work because I couldn’t get enough rent on the deal under a L/O then I would need to be able to sell on contract to make the deal cash flow by getting a good interest rate increasing the payments enough. Then I would want the deed or at the very least to buy on contract so I can resell on a contract at a higher price and carry the balance at a higher interest rate to my buyer.
If the deal won’t cash flow enough and/or the back end profit would be minimal then I would want to just flip the deal by making a decent profit off my buyer’s down payment and taking that as an assignment fee. Then my buyer would just take over my existing contract I have with the seller!
It all boils down to how the numbers pencil out as to what way would be best to do the deal and how motivated the seller is to get out from under the property.