STRATEGIES – EVERY CHALLENGED BUYER IS DIFFERENT
EVERY TRANSACTION HAS TERMS. Agents are familiar with ONLY one type where the Buyer pays a down payment of 20% and gets a new loan. But, there are other alternatives.
The strategy or strategies chosen one are based upon the client and the client capabilities. Typically do not require immediate qualification for a loan. However, a Seller is entitled to be released from the burden of debt within a reasonable period of time with the Buyer getting a new loan.
The good news for the challenged Buyer is that he/she is occupying the property while preparing for the new loan allowing the property to grant him or her positive benefits during the process.
There are strategies where no new loan is required. Each has its limitations BUT, all are positive for the Challenged Buyer.
CAPABILITIES AND CHOICES
Will require about 5% of the purchase price as the option consideration. Asking the owner to freeze the price. Buyer may purchase. Consideration may or may not apply to the purchase. Must be drawn very, carefully. Actually 2 documents. We require escrow and title. Make certain Seller can perform and no hidden surprises. Most agents hate them. Bad experience, no commission, and stories of lawsuits. Potential Buyer still dealing with Landlords and all the challenges of renting. Probably not 1st choice.
LEASE PURCHASE / RENT TO OWN
Similar to Lease Option. But, language says Buyer will purchase the property. May be entitled to tax advantages on the payments. IRS says case by case. Price usually inflated. Payments 50-100% higher than normal rent. Short term. Over 70% never completed. Big Benefit to Landlord!!! Might be utilized to purchase property in foreclosure. Requires great care!
LAND CONTRACT OF SALE / INSTALLMENT SALE
SIMILAR TO BUYING A CAR. The Buyer makes a down payment – usually 8-12% of the price. That payment may be staged depending on Seller. Buyer allowed to write off the payments, keep the appreciation, etc. , earn pay down on underlying loan (s). BUT TITLE DOES NOT PASS from Seller until Buyer has “performed” or completed the contract (like the “pink slip” from the bank) – gets a new loan and pays off the Seller and the existing loan. Approved strategy in almost all states. (California OK). Most agents have little or no knowledge. Requires special documents and superior escrow and title support. Also requires servicing of the financing including an AITD so that all parties protected. No “he said”/ “she said”. Memorandum of Contract is recorded.
CREATE NOTE OR NOTES– SELLER WANTS CASH
Purchase price agreed upon. New 1st and 2nd TD created in Escrow. Buyer makes down payment – usually 10-15%. 1st TD is sold at COE to a note Buyer that services the note. Seller retains a small interest via the 2nd TD. Seller will receive most of their cash right away. Opens up probate properties.
SELLER CARRY-BACK FINANCING
Buyer may or may not purchase without loan qualification. May allow Buyer to re-finance financing with seller agreeing to subordinate to a new loan for an extended period. Allows a Seller to sell and remain “invested” in their property. Value may rise over time for increased protection. Seller gets their price and” re-invests” their equity right back in the property in the form of a secondary mortgage or note.
ALL INCLUSIVE TRUST DEED
Term understood by many. Rarely used. One payment by a Buyer for any and all loan payments on property. Taxes dealt with separately.
A joint venture between a Seller and Buyer where a Seller becomes or remains a passive investor in a property. Buyer occupies property. Requires a negotiated Agreement between the parties. Each get tax benefits. Profits, etc., are negotiated and made part of the Agreement. Length of the contract between the two lessens the requirement for re-financing. Great answer for Landlords desiring problem free investing and for Buyers without a reat amount of cash.
OTHERS AND COMBINATIONS
LET US FIND OUT WHAT WORKS BEST FOR YOU – OR NOT!!
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1605 Grand Avenue
San Marcos, CA 92078
CAL DRE 01870080
Dennis E. Hudgins
CA DRE 01431476