Wrap Around Mortgage - Help! - Posted by Bob-Tx

Posted by Bud Branstetter on February 24, 1999 at 21:57:57:


You are starting, in this price range house, to find a more sophiscated buyer that may want a contract for deed recorded. Or just feels more comfortable with an AITD. As far as future sale of note there are people that will buy a contract for deed. Although, the warranty deed is still preferred.

Two ways I might do it. One is to put title in a land trust and sell on contract for the beneficial interest. The other is to do the AITD but take the note in the name of a note trust.

My attorney some time ago pointed out that because of the foreclosure laws in Texas it takes no time to foreclose. Depending on the amount of money paid in on a contract it could take up to 60 days to let them cure the default. Even not that long, many judges will force you to foreclose, if they fight it, even after you cancel the contract.

Wrap Around Mortgage - Help! - Posted by Bob-Tx

Posted by Bob-Tx on February 24, 1999 at 21:29:58:

Have an opportunity to do my first wrap and am need of some propping up here.
SFH in good area, fmv = $90k Seller bought in '86 on VA NQA loan - current balance is $65k with payments of $798 PITI.
My offer is to take over the loan and he walks - currently it’s a rent house with problem tennants. My offer will stipulate that we close only after he gets them out of there. House is not in bad shape but will need repaint and new carpet, etc.
Plan would be to sell the house owner financed with 5% down and note of $85k @ 11% with payments of $955 PITI. I am thinking to sell on contract for deed so if there are problems with my buyer I can evict rather than foreclose. I would allow the buyer $2,500 credit off their down pmt. for doing the repairs themselves.

Sorry to be so long here but am hoping for some input. What have I left out? Any suggestions for doing it differently?
Are there any problems with selling the note on a contract for deed as opposed to straight up warranty deed(we might want to sell off the note in a couple of years)?
Thanks in advance.

Re: Wrap Around Mortgage - Help! - Posted by Bill Gatten

Posted by Bill Gatten on February 25, 1999 at 22:22:03:

Curious. What is it that makes you believe you could avoid Judicial Foreclosure, Ejectment and Quiet Title if the the balking tenant claimed that his contract for deed entitles him to an equity position in the property… and forced you to Unlawful Detainer Action before a judge?

My understanding is that a Contract for Deed, Warranty Deed, Contract for Sale or Land Contract are all in the same ball of gummy bears when the tenants (their attorneys) know the law.

My naivte here is perhaps is not knowing or being able to make the proper distinction between a “Contract for Deed” or “Contract for Sale” and a “Warranty Deed.” I’ve always presumed that each conveys an “equitable interest” in the eyes of the law: thereby elimiating the possibility of simple eviction if challenged.


Re: Wrap Around Mortgage - Help! - Posted by David Alexander

Posted by David Alexander on February 24, 1999 at 23:12:38:

Yep, you can sell on Contract for Deed in that price range. I would say get the people out, clean the place up and try not to do the paint and carpet. There are plenty of people looking for houses that will buy regardless, just be up front on how you are selling.
Also, if FMV is 90k, sell it for 95k with Owner Financing.

David Alexander