Refinancing a seller financed rental

9 Replies

Hey BP, 

I'm in the underwriting stage of what is now been a 4 month refi process. I'm using a private lender. I started the process by explaining to the lender that I'm seller financing a property in hopes of BRRRRing it into a 30 yr fixed. 


Long story short, the underwriter doesn't want to close because I have a recorded land contract instead of deed. I explained the deed is still in the current owners name until I pay off the seller financing and the land contract gives me legal ownership until that time. 


I explained this in detail when I began the application process. Now they're acting as if this something they've never seen before. 


This is my first time seller financing a deal but I was under the assumption this is a very common deal in the investment realm. 

Has anyone else had these issues and or overcame them? 

thx

"A FOUR MONTH REFI PROCESS", oh my heavens run from that lender, unless of course you were slow dripping in your paperwork.  A Land contract isn't ownership. Seller has to agree in writing to a "payoff" and if they have a mortgage(s) you also need escrow/attorney to have the bank payoff in hand at the proposed close date. Is seller not cooperating?

Go here and scroll down to "how to refinance:"  https://www.mortgageloan.com/r...

It's not hard and it's not a 4-month process.  Your lender doesn't know how to do it or he/she doesn't want to do it.  You will need to understand the financing process so you can either educate or current lender (seems like too big of hurdle to me) or find a new lender and discuss it in "financing speak."

Best.

Originally posted by @Caroline Gerardo :

"A FOUR MONTH REFI PROCESS", oh my heavens run from that lender, unless of course you were slow dripping in your paperwork.  A Land contract isn't ownership. Seller has to agree in writing to a "payoff" and if they have a mortgage(s) you also need escrow/attorney to have the bank payoff in hand at the proposed close date. Is seller not cooperating?

 It's been a nightmare. I've never taken more than 24 hours for any document they've asked of me. The current owner owns the property free and clear and we have a signed agreement for payments and amortization. The payments are facilitated by a turn key company here in Indianapolis and they've provided everything we've asked for. 

Shopping online and checking for the cheapest rates is a mistake that consumers make in searching for a lender. Would you have knee replacement surgery from the lowest cost physician? The beginners start at a chair in a bank branch or in a call center with a online presence. They don't have the experience or time to structure a deal or understand what you need. When your transaction hit day sixteen the signs were there: they don't pick up the phone so fast. And why? because the person is not that skilled, is not highly treasured, they have to open the vault, greet customers who eat time, and they decide to triage your transaction and file it under: takes too much time to solve, this one is dead.   What can you do now? I don't know the company name of where you went but you can go up the tree of management and complain. You may only get vague: we will call you back answers then a denial letter. The lender had a legal obligation to answer in 30 days. Did they send you a laundry list around day ten? If they did it gets around the 30 day rule. I would dual track this plan: apply somewhere else with a lender who has more than ten years licensed and is a mortgage banker who can choose from 20 platforms. The money on the appraisal, the 120 days of worry, and the papers are all sunk costs. Abandon ship BUT WRITE to the manager, WRITE a BAD review, WRITE to the CFBP. If you have written documentation that you told them upfront and was very clear about the vesting from the start they owe you some money. If it was verbal, nothing. The only thing in a real estate transaction that matters is what is in writing. I have borrowers email as it keeps a record for us both. I also record everything. Your lender won't recall what they said. I am so sorry, I apologize that you got a nuckle-head, who I don't know at all. Who is this // name of company, feel free to add that to help others.   Take this as a learning experience. Real life pain makes us super smart. Next time find the knee doctor who graduated from Harvard, has done 1800 knees, and listens to your needs. 

@Marcus Holloway An important distinction…..A refinance is for when you Own the property (title in your name) and you have an existing loan/mtg. To do a BRRR you need to Own the property, not have it under a land contract

You do Not own the property. You will need to get a Purchase loan and you need a lender that will credit whatever you have already put down as a down payment. 

Originally posted by @Wayne Brooks :

@Marcus Holloway An important distinction…..A refinance is for when you Own the property (title in your name) and you have an existing loan/mtg. To do a BRRR you need to Own the property, not have it under a land contract

You do Not own the property. You will need to get a Purchase loan and you need a lender that will credit whatever you have already put down as a down payment. 

I understand there's a difference between land contracts and deeds. I just don't understand why it's so convoluted here at the last step. The home appraised for much more than the remaining balance of my loan. I have a tenant in place. The land contract is recorded with the county showing I have an agreement with the current owner. I've proven 12 months of payment. Seems like getting a loan for the current balance, to get my name on the deed, then starting the refi process over is a huge waste of time for all parties involved.

@Marcus Holloway You will not be able to get additional cash out from this transaction, you will only be able to pay off the owner after 12 months of payments. Since you mentioned BRRR (which usually includes getting cash out?) I think this may be your problem. You need to make sure any new lender does not have an overlay saying land contracts are ineligible.

There are other mortgage products that are not sold to Fannie/Freddie (AKA GSE's) that will accommodate what he wants.