I'm a rookie investor and have found a property that would be better suited for me if the seller was willing to owner financing. How exactly do I approach the seller on this? From what I have found the owner owes right around what he is asking on the property. Is Subject 2 something I pursue first? Or should I jump right to owner financing? What questions should I be asking the seller to help me decide the right approach? Is there any due diligence I should be doing to help find the best avenue?
The property needs serious rehab and looks to be around 50% occupied (20 units in total). If some additional numbers would help answering a few of these questions I can post them. Thanks!
Speak to a local real estate attorney with experience with this and see if it is possible without violating the due on sale clause. Prepare an offer and hand it to the seller or selling agent. May also help to provide a credit report, W2, and anything else a normal financial institution might use to qualify a person for a loan.
@Spencer Rossie The seller would not be able to offer seller financing (in the traditional sense) unless they paid off the mortgage. So you would have to buy subject to the existing mortgage. On larger properties sometimes mortgages are assumable if you are approved by their lender. But probably not.
"Subject to" for the remaining payment schedule of the mortgage is risky. If you plan on rehabbing and selling or refinancing and holding, say, within a year, this could be an option.
Subject To is seller financing, the seller finances that sum remaining on the underlying mortgage under the same terms, they are on the hook to the lender, you're on the hook to the seller.
Agree with Larry, good for short term holds. If you rehab, you better know you can refi it, it is possible to lose it.
Only one way to avoid the due on sale, when the transfer arises out of an estate transfer or estate planning transfer, all others are subject to the acceleration clause at the option of the holder or holder's instructions.
Yes, see your attorney.....and I'll be down some time, have a shrimp boil and pass a good time! :)
Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com
I was wrong, the seller owns the property out right.
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