Owner Carry Loans - How to structure escrow - what am I missing

2 Replies

Hi All! 

Can someone help me with this Owner Carry scenario? How do I structure the escrow or loan. Sellers wants the down payment in their pocket right away. so do I create an escrow that also draws up separate loan docs for the balance  - I want SELLER to continue paying their small mortgage, but give me possession of the property to rehab it and pay them off everything when I finish rehabbing, sell house and escrow closes. Or do I need to pay the mortgage for them like a wrap around? 

Purchase Price $150,000

I put down 10% = $15,000  (They want immediately) - Then I pay seller 10% interest only on the balance amount $135,000 after the property is sold 

They receive $6,750 plus the $135,000 (They already have my down payment of $15,000) Seller nets $156,750 

Seller owes $70,000 with payments of $500 month - do I make this payment for them or let them continue to make it until I pay it off? 

Let me know if I left out any pertinent info. 

THANK YOU -  to any and all who have a moment to think about this. and help out! I'm grateful for the input. 

BJ

Hi BJ,

I haven't done a deal like this, so take this appropriate skepticism. 

Are you planning this as a flip? when you say "after the property is sold" I'm not sure if that means sold to you, or sold to an end buyer after rehab.

If the seller has a mortgage on it, it is very possible that company may call it due when they see it is being sold, that is the risk of subject-to. However, if you do this deal, it seems reasonable to me to say you will take over payment of their current mortgage, and then pay them the remainder of the 10% interest only that you have negotiated.  

You may also want to negotiate a flat amount to the seller, if you are paying down their mortgage while this is happening they are gaining more equity every month. So you could say "135k, minus closing expenses at closing" which gives you the principle from those payments. Good luck!