I was listening to podcast #70 about subject 2 and seller financing. I have a few potential deals with me as the buyer and seller financing. I want to hold off payment for 60 days til I find a buyer and then start making and receiving payments.
@Grant Kemp mentioned paying a minimum option fee of $10 for 60 days to find a new buyer to contract in the podcast. How do you add that option to a purchase contract and what is better a land contract/ installment contract where a dollar for dollar is subtracted from principal or a standard mortgage agreement PITI? Please explain.
My deals seller financed would look like this as an example
85,000 Seller asking price
1,000 down payment
3-6% interest for 360 months
then I would resale
6-8% interest for 360 months
I hope this makes sense. Thanks in advance for responding.
I know it's confusing but you got to keep this simple
if you have a property that has a loan against it not free and clear
You're offering the seller payments and then pay off the note down the road
You could have
interest only payments
no payments for six months which is called a moratorium
The two devices that are used but it depends on your local customs are subject to existing financing in a note and a wraparound mortgage
In certain states like Georgia and Ohio when contracts or installment land contracts are common
Installment land contract is an agreement wherein the buyer makes payments in the manner similar to a mortgage but the seller holds legal title to the property until the contract is paid off. The buyer has equitable title, and is the owner of the property. The equitable distinction is difficult for many people understand but here's a common example.
Suppose you purchase a car from a dealer. The lender holds title until you pay it off. You're the equitable owner, you have the right to drive the car. The bank holds legal title but the banks officers can drive your car without your permission.
The contracts are basically a buyer and seller sign an installment plan contract which is very similar to a mortgage or deed of trust. The buyer also signed a promissory note under which he agrees to make payments to the seller on a monthly basis with interest
If the seller has a mortgage on the property he's going to continue to make payments on that underlying mortgage. What is typical is that the seller will collect money for insurance and taxes from the buyer and then pay those expenses himself.
Loan servicing companies to protect the buyer are used to inexpensively take money directly from the buyer and pay the P ITI payment in any excess is given to the seller.
You may want to record as a buyer installment Lane contract as a memorandum to protect your interest.
I like to think installment land contract is very similar to a wraparound mortgage with an existing loan.
You may want to use open escrow instead of recording the installment land contract. The escrow company may hold executed warranty deed from the seller and executed quitclaim deed from the buyer in the event that the buyer wishes to pay off the installment plan contract, the escrow company record the warranty deed from the seller. Conversely in the event of a default so I can theoretically record the quitclaim to nullify the agreement but most courts will probably not uphold the transaction if it were challenged by buyer was sufficient equity in the property.
Many times the trust can be used to protect your interest if you're buying on land contract if the seller dies or gets incapacitated or gets sued
Please see a local attorney
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