You can write and sign your own contract without an attorney. But I advise against it. Remember, the real reason for a contract is to enforce the terms of the agreement if you find yourself in court. If your contract has problems, the judge can “interpret” it or even throw it out and fall back on civil law. You could get left in a position very different than what you intended!
Your attorney gets paid to think about all the problems before they even happen, and to cover your posterior by writing a bullet-proof contract. It’s money well spent, even if you never need to go court.
In fact, the better your contract, the less chance that you’ll end up in court. You can agree on anything verbally with the seller. Just remember that a verbal agreement is worth the paper it’s written on. Use an attorney - he/she will be working for you, and will protect your interests in the matter.
One way is to ask the seller to carry back a 35% second mortgage, then go get a 75% first from a commercial lender. Of course, the property must have enough value, based on current rents. That way, you’re financing enough to cover your closing costs and have a few dollars left over to get started running the thing (you’ll walk away from closing with a check). I’ve always had some “extra” expenses pop up right after buying a property. There are any number of other ways to buy with little or nothing down, also.
Are you jumping off of a building, off of a mountaintop, or out of an airplane?
All I can say is YES it is possible to do 100 % financing depending on how good is the deal, the size of the deal, seller?s cooperation, how it?s structured, your financial strengths and circumstances, and lender selection.
I’m new to REI and have been reading through some of the treads in this forum…why would a seller carry back a 35% second mortgage? What terms are usally set in place by the seller to get his money back? Why 35% and not 40% or 50%?
Typically, the property has been on the market a while and the seller hasn’t gotten good offers yet. This way, the seller will at least get 65% of their price at the closing table. If the property is selling for $200k, they’ll get $130k minus their closing costs. They just have to wait on the rest. But they get monthly payments while they’re waiting.
I usually offer to cash them out in a 3 or 5 year balloon, so they’re just taking monthly payments for 3 years, then they get the rest of their money.
If you don’t pay, the seller has recourse to foreclose and assume the first mortgage. As to 35%, it’s just convenient in that I can give them as much cash as possible. I’ve bought properties with 100% owner financing. I’ve bought them with 25% owner financing. It just depends on the circumstances. I chose the 75/35 with 10% holdback as an illustration because most commercial lenders will go 75% loan-to-value based on rental income, so long as the property can support the payments.
Much clearer. Thanks for the post.
I’m assuming while structuring these terms, it is done through an RE attorney right? It’s not a contract you just write up and the seller agrees to sign?
I read a lot on the forums about people agreeing on terms on notes, lease options, owner financing, etc… and wasn’t sure if everything needs to go through an RE attorney or it can just be typed up and agreed upon by both parties? Please help me clear this up.