Posted by JohnBoy on March 14, 2002 at 15:51:24:
It’s pretty much the only way I do it these days.
? on One of Careltons technques - Posted by Jeff
Posted by Jeff on March 14, 2002 at 10:03:21:
In Carleton Sheeets program, he talks about a technique where you
would move an assumable mortgage from a senior position to a
junior. what does that do for the buyer?
It’s a little dated . . . - Posted by JoeKaiser
Posted by JoeKaiser on March 14, 2002 at 12:50:10:
Way back when, we’d buy from sellers who’d sell with little down and carry back the financing, and we’d make payments to them.
Fast forward a couple years . . .
Property has doubled in value, there’s a ton of equity there but you don’t want to payoff the low interest seller loan. Still, you’d like to be able to get at some of that equity.
Since you’ve made all your payments on time and since the seller trusts you and has plenty of equity behind his mortgage, you approach him with a proposal. You’ll pay the loan down a bit, maybe $5000 to him, if he’ll agree to allow you to go out and get a new first mortgage. You don’t pay him off, he just moves a step down the ladder.
Since you have an established track record, are putting cash in his pocket, and have plenty of equity to support it, he may say go ahead.
The problem, though, is banks are much tougher to deal with now when it comes to this sort of thing. If it doesn’t “fit” into one of there programs, they may decide it doesn’t even exist, which means no new loan for you.
This is a handy little trick that has seen better days. I can think of better ways to make the same thing happen.
Joe
Re: ? on One of Careltons technques - Posted by Jeff
Posted by Jeff on March 14, 2002 at 11:21:56:
Sorry if i was unclear. Carleton talks about paying lendor cash to move mortgage from senior to junior, and then take out a first mortgage, and with proceeeds of first mortgage pay the lender of second mortgage I just dont understand the purpose, Im a newbie to investing and there are things that carleton talks about that arent so clear, a) what is the purpose of this idea, and b) why is their a risk involved more so then if this was a senior mortgage
basically what is the difference in the p[osition of the mortgages
Re: ? on One of Careltons technques - Posted by JohnBoy
Posted by JohnBoy on March 14, 2002 at 10:29:02:
Can you be more specific about the technique you’re talking about?
I don’t think you are understanding this correctly. Any lender that has a senior position would have to agree to subordinate their position to become a junior position behind a new first. I can’t imagine why any lender already in a senior position would even consider doing such a thing. That would only put themselves at more risk if the buyer ever defaulted. Why would they want to do that?
Re: ? on One of Careltons technques - Posted by Jeff
Posted by Jeff on March 14, 2002 at 11:20:25:
Sorry if i was unclear. Carleton talks about paying lendor cash to move mortgage from senior to junior, and then take out a first mortgage, and with proceeeds of first mortgage pay the lender of second mortgage I just dont understand the purpose, Im a newbie to investing and there are things that carleton talks about that arent so clear, a) what is the purpose of this idea, and b) why is their a risk involved more so then if this was a senior mortgage
basically what is the difference in the p[osition of the mortgages
Re: ? on One of Careltons technques - Posted by JohnBoy
Posted by JohnBoy on March 14, 2002 at 12:34:27:
The risk is that if the buyer defaulted and the property was foreclosed on then any second position lien holders would have to pay off the first lien holder to protect their interest. Otherwise if the property goes to sale any proceeds are first applied to pay off the first lien holder and IF there is anything left over that would go to the second lien holder. If there isn’t anything left over the second lien holder’s lien is wiped out and they end up getting nothing. So to insure their interest they would need to pay off the first lien holder to protect their interest. If the amount on the first and second together equal close to market value then chances are the second lien holder would not want to bother with paying off the first since by the time they get the property back, sell it, pay a realtor commission, take a discount just to get rid of it, they will have lost money anyway. So if they already have first position then they would be stupid to subordinate behind a new first.
Now if you were going to get a new first and offer the current first a chunk of money to subordinate their position by paying down the balance on their loan then they “might” be willing to go for something like that. But I wouldn’t hold my breath over it!
Also, he talks about doing this with assumable loans. The assumable loans you don’t have to qualify for are far few and between and any that you do find around today probably have a low balance owed on the property. The ones that are assumable today will require you to qualify to assume them. If you can qualify to assume the loan then you can qualify to get a new loan anyway without having to jump through all the extra hoops.
The purpose behind his strategy of doing this is to be able to get a new first for a lower LTV (loan to value) where you can qualify easier for the loan and have the second subordinate their position to make up the diffence to where you could buy with no money down. But I think you would have a hard time getting a lender with a first to go along with this. If they did you would probably have to be a strong borrower with excellent credit and income to pull it off.
There are way to many easier ways to buy property without having to try and go through all that stuff! You can buy property by taking over existing loans whether they are assumeable or not and you don’t need any new loans, credit, income or a job to do it with!
Read this site and you will learn all about this stuff right here. Go to the main news group board and search the archives by typing “subject to” in and you will get over 64,000 posts on the subject. Also type in lease options and read through those as well.
Why take out any loans in your name when you don’t have to?? No new loans in your name, no credit required, no income required, no job required, and you can do these without even being personally liable for anything once you learn how and have the knowledge in how to do these.
Re: ? on One of Careltons technques - Posted by Randy_OH
Posted by Randy_OH on March 14, 2002 at 16:15:19:
JohnBoy,
In searching the archives for info on “subject to” deals, I found it works better to use “sub2” as the search term. You get a much more manageable list. When you use “subject to” without quotes, I think you get every post that has EITHER “subject” OR “to” in it. Maybe you can avoid this problem by using quotes, but I think I tried that and it did not work. Anyway, “sub2” works great. Just thought I would pass this on for what it is worth.
Randy
Re: ? on One of Careltons technques - Posted by Jeff
Posted by Jeff on March 14, 2002 at 12:45:22:
What is “Subject To” how can you take over a loan if its not assumabe, dont you have to worry about Due On Sale?
Now Im realy confused. Did I do wrong by getting Carletons program? It sounds from your reply that it is unrealistic. I really dont know where to start gaining this knowledge.
I reall want to make a success of going into real estate, but i dont even know where to start
Re: ? on One of Careltons technques - Posted by JohnBoy
Posted by JohnBoy on March 14, 2002 at 13:04:55:
“Subject to” is when you buy property subject to the existing financing already on the property. You buy the house where the seller deeds it over to you, you now own the house, the seller leaves their loan in place and you just take over the payments.
For details about the due on sale clause read this 2 part article at these links:
Part 1
http://www.creonline.com/articl53.htm
Part 2
http://www.creonline.com/articl71.htm
Then go do a search like I said on the main news group for “subject to” and you will get plenty of posts that will tell you a lot of what you need to know.
Re: ? on One of Careltons technques - Posted by Jeff
Posted by Jeff on March 14, 2002 at 14:12:24:
Have you done this approach? and thank you