Purchase requires assumption of current debt. Next Steps?

Question

I received a listing from a broker that requires the buyer to assume the property's existing loan.

If I determine a revised value that's ~$1M less than the listed principal amount (after adjusting vacancy etc. to 10% and expenses to 50%), what are the common next steps? Do I just ask the broker if the original lender is open to negotiating new terms? And if they're open to loan assumption financing?

Am I missing other obvious questions?

Charles Seaman · Answer

@Owen Burton If a loan is being assumed, there's no negotiation of the loan terms.  Those are already set and will remain the same.  You can negotiate the purchase price.  Negotiating the purchase price doesn't necessarily impact the loan amount in this instance.

Justin Moy · Answer

No this would get worked out with the lender and the lender decides the cash flow is down or the original DSCR is in threat

Eric Nelson · Answer

Owen, I will shoot you a message. There are several other options you can explore, and we have had success with. One example- you could get a line of credit as a second lien, and keep that first loan in place.

Justin Moy · Answer

I don't think I've heard of the terms being renegotiated, at least in the new buyers favor. What they might do if the property has fallen in performance is require you to escrow additional PITI.

Charles Seaman · Answer

@Owen Burton You're welcome

Owen Burton · Answer

I see, that makes sense. Thanks for the response, Charles.

Owen Burton · Answer

Thanks for your response, Eric. I saw your message

Owen Burton · Answer

Thanks for your response, Justin. Would they require more PITI even if they're advertising a cash-flowing property (my calculations show this too, even if less than advertised)? Would they normally put that in the offering memorandum, or is it assumed that you'd work this out with the lender when getting into the nitty gritty of assuming the original loan?

Purchase requires assumption of current debt. Next Steps?

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