Need Creative Deal Structure Advice

1 Reply

Trying to sell a property I own in a nice, acreage neighborhood. We own one of the larger parcels (4.5 acres) with large, half-acre pond. We bought the property with the intention of building a custom home. We installed a water well, fencing, a compacted house pad, and built an $80k barn/workshop.

Before we could start the house, I got laid off (oil & gas) and we converted about 1,000sf of the barn to living space. Spent a year living there before I found a job, and by then we were ready to get back into a real-sized house. We bought a nearby property and moved out.

We're now trying to sell the property, but with close to $100k in non-house improvements (well, electric service, house pad, barn/workshop, fencing, etc.) it's a tough deal for a traditional lender to process. We've got it listed at $259k.

Recently received an offer and came to terms with the buyer for a sales price of $255k plus a few improvements (septic system, some additional carpet, etc.). They wanted to use FHA financing, but predictably, that didn't work out. They've asked for several extensions while they try to work out financing with different lenders. We're fine with this - they're a nice young couple who obviously love the property, which we identify with. We're not in a huge rush, since, other than a $50k home equity loan, we have no debt on the property.

They've asked about owner-financing. Original offer was 10% down, 6% interest, with a 1-year balloon. Their plan is to convert the entire building to living space, which would put its value at about $400k based on recent comps. Problem is, 10% down doesn't pay off our home equity loan.

I tracked the buyer down and called him, and we sort of agree in principle on a deal, but the details are still fuzzy. He's able to come up with $50k down, allowing me to pay off my lien, but I'll still be short the title company costs and commission fees. I suppose I could borrow those funds from a family member and then pay them back with the owner-financing proceeds over the next year, but then I lose the benefit of owner-financing (i.e. the interest).

Not sure the buyer can wait until my listing agreement expires, as their lease expires in May, a month before my agreement. I was thinking maybe a wraparound mortgage was the answer, but I read somewhere that they can't be refinanced - you're basically locked-in for the length of the loan? That seems unlikely, but what do I know.

Buyer's intent is to purchase property, convert entire building to living space (which, according to deed restrictions, just means insulated and conditioned space), and then refinance in 6 (conventional) or 12 (FHA) months to pay off owner-financed note. I'd like to pay off my equity note right away, but it's not an urgent need, as long as buyer's payments cover my monthly nut ($250 equity loan, $300 taxes, $75 HOA).

This seems like a puzzle to me - all the pieces are on the table, I just can't see how to fit them all together to complete the task. Would be grateful for your suggestions.

@Andrew Taylor - look into a wrap around mortgage, contract for deed or an option contract. Contract for deed your still on title, they have a contract for the deed where they need to pay it off. They move in, improve the property then refinance you out. Definitely get with an attorney on this whatever path you choose.

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