Owner Finance... I am confused Help Please!

Silver Spring, MD · Member since 2017 · 33 posts · 1 vote

hello BP community. This property has been brought to my attention and I am a little confused on how its going to work out. There is a lon of 135k on this property and they want me to bring 12k to the closing table. The owner says she is willing to owner finance and the wholesalers say they will be working with a title company that will also help me transfer title once I have found the end buyer. The thing is it legal for a title company to transfer owner of a loan to a new buyer from the original owner and also is there a possibility of a positive cash flow on my end?

PrOperty details

ARV $228,000, Asking $12,000 and Repairs=$45,000. Please help me analyze this deal. Thanks!

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Natalie KolodijBusiness Member

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Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes

I'm also now confused....

The owner can't really owner finance to someone- they don't own the house to sell, the bank owns $135k of it

A wholesaler brought you this property

Wants you to pay $12

And then wants you to find an end buyer

And then the owner will sell to that end buyer as owner financing? They won't let you just transfer the loan over without a new buyer qualifying for a loan....

And what part are you getting paid for if you're paying 12k?

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Robert Rayford
Investor · Las Vegas. Jacksonville, Bay Area Ca, Nv, Ca, Fl · Member since 2015 · 511 posts · 220 votes
9y
@Azah Che, this sounds like a mortgage wrap to me. A mortgage wrap was popular years ago when buyers could not afford their mortgage. This is basically how it works: When a property has a first position lien holder ( bank or lender) and the seller of the home is under water or the property wont appraise for the current loan balance then the seller will leave (carry) the existing loan in there name instead of a payoff. The seller will then use a loan servicing company to handle the monthly payments and the buyer is added to Title. Some of these are done with the bank in the loop and some are done without the back knowing. Beware of the latter. This is a form of creative financing and can be a very effective way to acquire property from a seller that just wants out. Good luck.
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Joe SplitrockPro Member
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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
9y
Originally posted by @Account Closed:

@Joe Splitrock I did NOT say that I call the two the same. I said "some call it Owner Financing some call it Subject To", for a reason. I also said "There are other terms I won't get into here."
"Some" is not me. I did not say "I" for a reason. Don't put words in my mouth. I am very precise and touchy about what I say and how I say it.
Also, the question was about the transaction, which I answered, not about the risks to the seller, which was not asked.
You say "I personally don't think "Subject To" should be legal." Fine. But, it IS legal. I don't think horse sh*t should stink, but it does. ;-) Nope, not agitated, just precise.
You took the time to correct Natalie, so don't jump on me for clarifying your statement. You could have said "some people incorrectly call it" if you wanted to be precise. Your statement implied the terms are interchangeable, whether it be you or others interchanging them. They are not interchangeable, which I think you agree is correct.
Her question was really about the risks in this deal. My statement was that the risk is more with the seller in this type of arrangement and less risk to the buyer. I think you also agree with that point.
My point is that "subject to" is used by some people (not saying you) to take advantage of others. As long as the risks are clearly explained to the seller, I don't have a problem with "subject to". The problem is that in many cases it is not explained and it is left in the fine print.
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Azah Che
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Silver Spring, MD · Member since 2017 · 33 posts · 1 vote
9y
Originally posted by @Robert Rayford:

@Azah Che, this sounds like a mortgage wrap to me. A mortgage wrap was popular years ago when buyers could not afford their mortgage. This is basically how it works: When a property has a first position lien holder ( bank or lender) and the seller of the home is under water or the property wont appraise for the current loan balance then the seller will leave (carry) the existing loan in there name instead of a payoff. The seller will then use a loan servicing company to handle the monthly payments and the buyer is added to Title. Some of these are done with the bank in the loop and some are done without the back knowing. Beware of the latter. This is a form of creative financing and can be a very effective way to acquire property from a seller that just wants out. Good luck.
Thanks for the clarification. Cheers!!
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