Posted by Terry (Houston) on March 09, 2001 at 22:29:02:
felt the same way till someone showed me.
Good luck.
Terry
L/O vs. Subject and this deal. - Posted by Redline
Posted by Redline on March 09, 2001 at 14:39:15:
Looking at both these methods and going through course materials I’m a little confused.
Ex: I have a buyer wants to dump a property with about $20k equity in it - wants to move on to another house and not be bothered about this one. Owes about $80k, worth about $100k.
Now of course I don’t wanna buy the place, I’d rather just control it and flip it to a retail buyer. Doesn’t need any fixup.
So would you:
- L/O this from the seller, L/O to a t/b and stay in this deal (even though it’s slim)?
- Buy subject-to from seller, L/O to a t/b and stay in this deal (even though it’s slim)?
- Acquire an option on the property, turn around and flip it, and close simultaneously?
Is there a real difference between #1 and #2?
This is assuming I can convince the sellers they can get their new loan with this property still in their names.
Thanks as always,
RL
I’ll take door number 2… - Posted by jp
Posted by jp on March 09, 2001 at 17:50:47:
…anyday (when possible). Subject to is always my first choice. Then, CFD & lastly L/O.
BTW, if you do it subject to, you sellers CAN expect a hard time qualifying for a new loan on their next house. If this is an issue, I’d recommend CFD, which lender’s will usually give 100% credit for.
…jp
Re: L/O vs. Subject and this deal. - Posted by Terry (Houston)
Posted by Terry (Houston) on March 09, 2001 at 14:50:55:
Can I ask aquestion?
Why is this deal SLIM? You are getting $20k in equity right?
If the numbers are right and you do have the $20k here why would you not get this under contract for a subject to deal ASAP?
If they are worried take the property on a Contract for Deed [or Land Contract whatever your area calls it]
At a minimum flip it and at a maximum put it on the market Owner will Finance for about $110,000.
After you get it under contract do the due dillegence and make sure there are no liens, taxes owed, inspections etc prior to filing the deed it you go that route.
If you do the CFD get them to escrow the closing docs for you.
Get it under contract before someone else does.
Good luck
Terry
Re: I’ll take door number 2… - Posted by Redline
Posted by Redline on March 09, 2001 at 21:43:18:
I’m not too thrilled about CFD - I think I can make it work with a L/O probably. We’ll see what the mortgage people say. Worse comes to worse I’ll figure something else out.
Just curious … why is L/O bottom of your list?
Thanks,
RL
Re: L/O vs. Subject and this deal. - Posted by Redline
Posted by Redline on March 09, 2001 at 15:07:48:
Thanks for the reply …
Well by slim I mean sometimes $20k in supposed equity can disappear real fast if one is not careful. I’m probably too careful all the time. I may have to give them a few dollars to move, and this assumes that I won’t have to make any pmts before I find a buyer (I should be able to structure it this way).
OK so a subject-to deal here, and a L/O to a t/b for $100-$110k sounds pretty good. Or else, I may just flip the thing provided my buyers don’t run into any seasoning issues. I will have “my” mortgage guy check into this and see if sees any problems.
Thanks again,
RL
Re: I’ll take door number 2… - Posted by jp
Posted by jp on March 09, 2001 at 23:09:15:
When I buy on CFD, I’m in much more control than if I buy with a L/O. It’s all in how you structure it & how you work out the “details” of course. But L/O tends to give the seller more control & CFD tends to give the buyer more.
If you want to know more, get Bronchick’s Cash Cow course. Its principles have been my basis. Highly recommended & WELL worth the money.
Happy investing!
…jp
Re: I’ll take door number 2… - Posted by Terry (Houston)
Posted by Terry (Houston) on March 09, 2001 at 22:02:32:
If you escrow the deed for when you pay off the property, You make the payments to the lender or set up a third party to do it, you can secure your position. This is buying on a CFD. Subject to you get the deed and the rights of ownership.
Bronchicks Cash Cow course shows you how to protect your self and you get the tax benefits of owning the property via CFD. It will be easier to show you have equitable interest in the property if you buy via a CFD vs a L/O. This is why I would rather buy subject to or CFd then L/O last.
My broker would rather I sell on a CFD to sell the note than a L/O. That works well since she will buy the note or get ultimate funding for my buyers.
Some mortgage companies will only give 75% credit on a L/O for the purchase of a new home for your sellers.
A CFD can be viewed as a sale and they could receive 100% credit. This has been the case where some of the people I have bought houses from have informed me.
Just some thoughts
Re: I’ll take door number 2… - Posted by Erik Bergerud
Posted by Erik Bergerud on March 10, 2001 at 24:57:44:
I am intrigued by your discussion concerning this scenario. However, I don’t quite understand all of it. I am a LeGrand student (terminology is slightly different than Bronchick). My questions: what is buying CFD? Is that buying the house with owner financing so that we get the deed? It is your experience that selling CFD is better also? Mortgage co’s only lending 75% on L/O’s is a little disheartening. So instead, I should try to sell with owner financing… is this what you are saying? Sorry to sound so remedial but I am trying to get a firm grasp on this stuff before I dive into the mix.
Re: I’ll take door number 2… - Posted by Redline
Posted by Redline on March 09, 2001 at 22:24:29:
Knew the diff between Subject-to and L/C … guess I just feel more comfortable with subject-to and L/O’s for that matter but I guess it’s time to expand especially since this may be the best solution.
RL
Re: I’ll take door number 2… - Posted by Terry (Houston)
Posted by Terry (Houston) on March 10, 2001 at 08:48:35:
Buying CFD, Contract for Deed / land contract etc… will give your SELLER a better position to go out and buy a new house while you use his credit than buying on a L/O. This is for the mtg. Companies I have heard my Sellers talking to. This is up to the Sellers not you. If the question comes up while buying the property you should be able to explain to them. CFD means you get the deed when you meet the obligations of the contract. When you find a buyer that gets his own mtg. or pays off the underlying debt the seller is waranting the deed. What happens if you just pay the seller? Or he decides he doesn’t want to give you the deed? He gets other liens or judgments against the property? If you protect yourself by you paying direct to the mtg. company, escrowing the deed and putting it into a trust so the seller will not get any other judgments against the house you will be fine.
I have not delt with this myself because I am not trying to get the new loan, they are. Buying Subject to may also not be deemed a SALE for them by some mtg. companies but if you give them a HUD 1 closing statement or tell them to put the payment you give their mtg. company down as addittional income it may give them the credit they need.
This is for your seller.
Your buyer is a whole nother game. After reading Pipers post, Thanks Jim and HAl for bringing it back up!, I may be more inclined on the L/O for my sales. After a year I will turn it into a CFD if they have hit the 10% down mark. When I sell L/O I get 5% down.
So when I buy
Cash - If the price is right.
subject to - get the deed
CFD - Secure my position
L/O - Get the performance MTG
Sell
Cash
L/O
CFD
That is my philosopy after talking with several investors who have been around a while as well as Bronchick.
The mtg. companies lending only 75% is where your SELLERS are trying to get another loan, not your buyer. I am sorry if I got you confused.
Hope this helps
Terry
Look behind door number 3 - Posted by Bud Branstetter
Posted by Bud Branstetter on March 11, 2001 at 11:24:08:
You want to expand your knowledge base, right? Consider learning more about the Pactrust. It does solve the problems of L/O, Subject to and CFD. The seller can get their new loan as if they had sold, just like a CFD, but without the legal entanglements of the CFD. Too complicated some say. Is that an excuse for not learning something better? If you can do a subject to you can do a pactrust.