Posted by Michael Morrongiello on March 29, 2006 at 22:59:29:
Your spread or “Fee” can be negotiated but is NOT taking the sellers down payment. Here is how a typical transaction might shake out.
A property sellers Home sells for $100K where the buyers put down $5K cash as a down payment. This leaves $95K that the Property sellers will agree to owner finance by carrying back a purchase money 1st lien Mortgage & Note to be secured by the property.
The property sellers really NEED or want $85K cash as a total amount - AND don’t care how they get it.
Sunvest arranges to purchase the $95K seller financed 1st lien Mortgage & Note and funds $87,000.00 in cash for the purchase of it (or approx. 92% of its UPB-unpaid balance).
Your sellers accept $85K in total cash and you EARN $7,000.00 as a “fee” or spread…
This is represented by the difference betweeen what Sunvest is willing to fund, or the $87,000.00 cash amount funded for the purchase of the seller financed 1st lien Note and Mortgage of $95,000.00 and what the sellers will get in cash or $80,000.00 that you negotiated as a funding price to them for the sale of their Note = equals a fee of $7,000.00 to you.
Their total of $85,000.00 cash is acheive by getting the $80,000.00 in cash from the sale of their Mortgage & Note to Sunvest and the additional $5,000.00 funds being put down by the property buyer. This total equals $85,000.00 to them - which is what they Needed or wanted.
This is a very typical transaction where flexible and motivated property sellers are involved.
Hope this helps…
Best to your success,