(HELP) Seller Financing- Rules, process, and opinions
Dear BP Experts,
I recently stumbled across the Bigger Pockets podcast and have been hooked ever since! This is my first post on the forums so bear with me...
Details - I have a friend (whom I trust) that let me stay in his home when I relocated back to Omaha, Ne for a new job. The home is a 3 bed 2 bath home in a decent neighborhood, built in 1994. The homes in the area are selling for around $140k to $160k and similar homes are renting for $1,300 to $1,500. He purchased the home using FHA in June 2013 for $125,600 and is considering selling me the home using owner financing. I have a 6 figure w-2 income and just recently purchased a home using FHA down the street as well so I would be close and can afford to cover the mortgage on both properties if something were to happen.
Terms- He would sell me the home for $143,000 with zero money down, on a 30 year note, 5 year balloon, and an interest rate of 4.5%. The zero money down is the most appealing part to me just because I feel cash is king and try to keep a healthy amount liquid at all times.
Questions- From what I understand doing a seller finance deal on a home where the seller still has a mortgage is somewhat complicated and there are some laws. I would get an attorney to draft up all of the documents, but I am really unsure of what steps need to be taken since he still has a mortgage. I would love to get this deal done and with me managing the property I would cash flow around $250 a month (taking our 5% vacancy, 5% repair, 5% capital expenditures) and would't have to put down any cash minus closing costs.
- What are the laws or options when the seller still has a mortgage?
- What are the average lawyer fees to draft up the documents?
- What other provisions would need added to the deal to protect myself as well as my friend?