Notes

5 Replies

Were looking at wholesaling a tri-plex in TX. Great Income property or wonderful for extended family!! Currently 1 unit is occupied. Monthly gross 2400 month when all units occupied. 2- 1 bedroom 1 bath. 1 -2 bedroom. Seller will consider carrying note with 30K down. What does 'seller will consider carrying note with 30K down' mean?

'Note' just means promise to pay, written as a legal document (which the Seller has already done with whoever they have their mortgage with).  So this Seller is basically financing the rest of the deal as long as you cough up $30k first, and you promise to pay THEM the balance of the agreed purchase price on THEIR terms thereafter (rather than you having to go to a Bank yourself for the balance).  So if you then want to on-sell it, you could write up your own 'Note' (at terms more favourable to you than the one you bought from this Seller) and agree to carry THAT 'Note', while making sure that you fulfil the terms of the original 'Note' until cleared.  If that sounds hard, then that's the reason most newbies (and I am one) don't succeed as wholesalers!  [If I am mistaken in my comments, please let me know]. Cheers...

Brent - I think the transaction you described is a flip.  (Investor buys and resells at a higher price.).  In a wholesale transaction, Marques would execute a purchase and sale agreement with the seller and then assign that contract to another buyer for a fee.  The buyer then closes the sale with the seller.  The fact that the seller is offering financing can be a benefit to the deal, because the end buyer has an additional option for financing the purchase. 

Brent what you describe there is referred to as "Subject To".  Existing liens remain on title and title is transferred 'subject to' that existing debt.  That means the interest granted to the new buyer starts off inferior to the existing lien.  

By the OP, there is no reason to presume that the sale of the subject property is a Sub2. The presence of Seller Financing does not automatically mean title will not be clear and marketable for sale. It could be quite the contrary, the $30k demand, or a portion thereof, might be needed to pay the lien on the property that the Seller currently has. (we don't know from the post if any lien is present or what balance it has) Any portion of the $30k that does not go to paying off an existing lien would net out to the Seller's pocket at the closing of the sale.

The Seller's statement can be taken at face value.  If a Buyer, any buyer, comes forward and wants to put down $30k in cash, the Seller will carry back a note for the difference of the agreed Sale Price and the Down Payment.  

Example:
Sale Price:  $100k
Down Payment: $30k
Seller Finance:  $70k

We do not know from the post what the terms of the Seller's loan would be, which might be a barrier in and of themselves.  For instance if the Seller wants a high interest rate the end Buyer might qualify on their own for a bank loan to purchase the property with a lower interest rate to what is being offered by the Seller.  As such, no need to take the Seller up on his offer to finance.  

Brent, in a nutshell, do not look to do what you generally described.  Piling notes on top of each other.  You can search here in BP for Subject To and Seller Finance and find all sorts of threads to read which will help you gain a better understanding.  

Both Brent and Marques - Welcome to BP.

Ahh, thanks Mike and Dion. Your clarifications (and welcome) are greatly appreciated.

Thanks everyone for your input on this, truly appreciated.

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