Any agents ever done this?

Question

Selling @ $500k

Lender providing $490k

Can the remaining $10k be carried by seller? Will brokerage allow?

If so, should it be a separate contract? Should it be outside of current escrow? Should the $10k loan be a lien on the house?

Sean Dougherty · Answer

Thx.I'll speak with their lenders and my title co.

Sorry I was unclear. Buyer is putting $50k down. So loan will be for $450k.

Bruce Lynn · Answer

On our 3rd party financing forms it has space for 1st and 2nd loans.  Not sure about HI contracts.  If you don't know too, talk to your title attorney or title company.  Chances are they will know and know how to set up the contract, deed of trust, and note.

The 2% is $500,000 sales price minus $490,000 loan.  That means 2% down, not 2% interest.  Normally with conventional you need at least 3-5% and maybe 10-20% down, so you may have to take the 2nd mortgage for way more than $10,000.   Mostly likely you can't really do it separately in my opinion.  Needs to be part of the complete transaction, otherwise you are encouraging the buyer to potentially commit loan fraud....and they should not want to do that, and if you are licensed you don't want them to do that...and even if you are not licensed, you don't want them to do that.  People do go to jail for loan fraud.

To me you need two conversations before moving forward.  #1 with the mortgage company who is doing their 1st lien, to see what they will actually loan on $500,000 purchase price, #2 if they will allow 2nd to bring them up to $500,000 with no down payment.  #3 with your title attorney or title company to see if they will help you with the extra paperwork and contract.

Are you sure this is a deal?  This is a little surprising that someone who can qualify for $490,000 conventional has no cash for down payment.  What about closing costs?  That's another 2-3-4% potentially so where is that coming from?

Sean Dougherty · Answer

Thx Bruce,

Sorry, not sure how the 2% interest rate idea snuck in there. No. This is a conventional loan, not sure what the rate is.

Home is brand new. Will appraise over our rock bottom selling price of $500k but buyer is "making the case " that he only will qualify for $490k, DP included.

So I thought to offer the option of "I will carry the remaining $10k and work out terms favorable to both of us."

Question is, how to transact that? 2nd mortgage, lien, separate contract, include in escrow or private notarized contract between buyer and seller? Ect.

Bruce Lynn · Answer

Amazing lender is allowing 2% down?  That's rare.

You could probably do a 2nd for the $10,000.

Talk to your title company or title attorney and have them draw up the deed of trust and loan terms for the 2nd.  Typically high interest like 10%-14%, maybe more if it is a 2nd.  Maybe depends on value of the house and credit worthiness of the buyer.

Also 1st lienholder may not allow, depends on who that lender is and what requirements they have.  Some want to see skin in the game.  But you've already found one that will allow 2% down, so maybe they will also allow borrow to borrow for the rest.

I'm not a lender, but chances are 2nd needs to be disclosed on their credit report and to the 1st.  Normally they're asking where those funds came from.  Some allow gifts, but need a gift letter.

Maybe tell us more about the deal?  Whats the ARV?  Good shape or bad shape?  Hard money for the 1st loan or normal bank financing?  Local bank or national lender?  Reno needed or move in ready?  If reno, where are the reno funds coming from?