Re: BRIDGE PT’s - Posted by Bill Gatten
Posted by Bill Gatten on December 30, 1999 at 14:43:48:
Much of my company’s revenue is derived from our solution to the very scenarios you describe.
For some of these transactions (if not most), when the seller is not in too big a hurry for all of his cash (e.g., if he can wait 6 months or so…which me might have to do if he lost his buyer anyway), you might suggest that the property be placed immediately into a NARs PACTrust™ and ocupied by the buyer as a co-beneficiary, with the understanding that once the buyer’s problems are cleaned up, the trust will be terminated and the current loan refinanced by the buyer.
This arrangement, of course, gives the buyer virtually 100% of the benefits of ownership NOW (including all tax deductions), without having to wait and lose more tax dollars; and it gives the seller his down payment money now as well. Also, such a plan can even justify a higher purchase price (e.g., a premium for hthe seller’s cooperation and understanding).
Think carefully about the advantages here, Carmen: you make your deal now; frozen equity, higher price, locked-in mortgage loan for you; locked in sale for the Realtor (he/she gets the commission now, rather than waiting); locked in sale for the seller; protection against devaluation from the seller’s standpoint (or inflation from the buyer’s standpoint); no threat of penalty from Due-on-Sale Clause compromise; etc. And it gives your client ample time to claar up his credit or cash deficiencies without losing out on any of the benefits of homeownership in the meantime.
Under such an arrangement, when the buyer is ready to finance the property, his ownership interest in the trust (which shows upon on page 3 of of the 1003 as stock and bonds: not in the real property schedule) can be supplanted for the down payments requirement. Though the seller might opt to wait until the financing to collect, as many of our “Bridge PACTrusts” are done because the buyer doesn’t have the “money” yet, rather than not having the credit yet–'works both ways).
P.S., As far as the seller’s qualifying for his new loan on his replacmeent property in concerned…it’s never been a problem. We have a standard form letter as a part of our program that satisfies the new lender. It clearly shows that the former property has been adequately disposed of ('has never failed to pass underwriting to date–they ee it as akin to a Contract or Wrap sale).