Creative Solutions for this?

Question

Hello! I am wondering if anyone has some creative finance input for my situation. Here it is!

We own 3 residential properties and want to make an offer on a fourth but don't have the down payment and can't or don't want to afford it at the current rates. It is a 4-bed, 3 bath house in a premium neighborhood and has an attached Casita. It has been on the market for 280 days (possibly due to a sewer pump setup??). The owner is a trust representative and might live out of state. Previous owner possibly passed away. Price started at $849k and is down to $699k now.

My wife is an agent but I want to go to the listing agent and say, "I will hire you to represent us so you get the full commission. Can you convince the seller to let us take over the mortgage and finance the remainder of the price interest only with a 10-year balloon payment?" Or some variation on that.

Not sure how to pay the agent commission in this scenario but does anyone have any thoughts or tweaks on how to take this property down? Thank you!!

Hunter Reed · Answer

Jared, sounds like you have stumbled across a possible gold mine. The first view point I would asses is what are the local comps going for in the surrounding area? If other properties in the same area have been sold for $850k - $900k then this a great opportunity to make some serious cash and even pay off the 10 year ballon agreement structure. I would try and negotiate a sub 2 deal and take over the mortgage. You could even structure a 5 year or less ballon. The available Casita can easily be turned into a ADU where you can receive more income from the property. Look to rehab and preform a cash out refi. This would pay off the ballon and allow you to settle into a conventional loan with a better mortgage payment. I would ask the seller "Hey why don't I just take over the mortgage payments and pay you off in 3 years" This is what we call a subject 2 deal. With a subject 2 deal you can literally close in less then 3 days. You do not need a title and escrow company although I would advice using a lawyer. Your closing costs would include the agents commission and the price for a lawyer. All you have to do is go down to the county clerks office and ask them to transfer the deed of the property in your name. I recently just listened to a podcast over this topic and highly advise you to check it out. BIGGER POCKETS PODCAST EPISODE #757 Good luck with this deal!

Zane Cress · Answer

Their brokerage may not allow dual agency, that would be the first question. Assume your wife would know if she is an agent as well. Your wife could still represent the buying side and forfeit her commission. If the listing expires you could also try to contact the seller directly and offer the seller financing plan. The current agent may not understand this technique or be comfortable/capable of presenting it properly. The BP podcast just had a great interview drop with Pace Morby that is all about Sub2 deals, give it a listen.

Jared Haxton · Answer

@Zane Cress Thanks for the reply! I have been eating up all the subto podcasts and Pace's interviews for his new book. So I am right there with you! The property just expired and the tax records only show an estate. Any ideas on how to find the executor of the estate/seller? Thank you!!

Jared Haxton · Answer

@Hunter Reed Hey! Thank you for the reply! I have been mulling around how to make this deal work and just checked today and it is expired! The property is owned by an estate and I can't find the seller info. I am new to tracking down info like this! Have any pointers for this?

And it turns out that the owner that passed away bought the property all cash so I am assuming no mortgage. I want to offer $1500/mo interest only with a 5-year balloon (with balloon extension baked in per Pace Morby's advice). Have any thoughts on this? I am hoping the seller is just sick of paying the $500/mo in taxes, HOA, and Utilities. Then they might go for it. Need to find them first!!

Thanks!