structuring motivated sellers assumable loan, no money down deal?

12 Replies

Hello!

I have motivated sellers selling a 3 bd 2 ba modular home, 1500 sq ft. It's located in a once popular oil field town, outskirts of Colorado. The husband got a job 155 miles away and that's the motivation.

They refinanced on an FHA loan and the current amount owed is $150,000.

They just want someone to assume the loan and no money down, just a buyer to assume the loan. The buyer would need decent credit & stable income.

My QUESTION is, HOW COULD I STRUCTURE THIS DEAL TO MAKE A PROFIT OFF BRINGING A BUYER & SELLER TOGETHER? FINDERS FEE? ASSIGNMENT FEE? HOW COULD I, IF POSSIBLE, PROFIT?

Thank you

H.M.

You haven't said anything about how much the property is worth. There are lots of hugely motivated sellers out there but sadly, many of them own houses that no investor would see value in. A once popular oilfield tends to indicate that this may be a declining market. Post details.

not to get too obvious but have you determined the loan is assumable..I would get a professional opinion and more information on that issue before marketing the option or spending much time on the assumption angle.....best of luck....

Assuming the loan makes their problem your problem.  You don't want to assume the loan.  You want to takeover payments.  Big difference. (Of course, I am assuming the economics of the deal work for you to make a profit on this deal.)  

There are several ways you can takeover payments.  Which one MAY work in this case depends on the details (ah yes, the devil is always in the details).  I emphasized "may" because taking over payments has to make business sense. Taking over payments sounds simple enough, but it is a sophisticated strategy - not one someone can explain to you in a blog or a forum post.  Not every situation qualifies, and it's more than just the numbers.

Partner with an investor who has experience in this area - get someone to coach you through it.  Better to give up a percentage of what could be a good deal than hold 100% of a bad deal.

@Henrietta M. typically FHA loans are not assumable. There are a number of strategies for their situation but most hinge on at least some equity. If no equity, then it's more challenging to get a deal done.

Follow Rod Yarger advise. Find someone that is currently doing wraps or subject to deals.

I too am concerned about the trajectory of oil patch real estate in the near term so that should also figure into your approach.

Let us know how things turn out.

@BillHamilton I found out the property is valued at $165,600. There is a small amount of equity and I just really like the assumable loan aspect.

PLEASE, Any creative financing advice on structuring the deal would be appreciated!

Interesting valuation you have, the $600 part sounds like a tax assessment or an old appraisal, I haven't seen an investor on BP reach a valuation that comes in at $100 above a round number.

Tax assessments are for tax purposes, not an investment or market valuation.

If that is a true value, there isn't enough of a spread to make this a deal, by the time you have closing costs you'll probably be at market value, you could go over if that valuation is off just a few % points. 

If the owner recently refinanced, that FHA loan is not assumable as you think.

Do you want the place for your own home? Because it's not worth the risk as an investment property IMO. :) 

I have motivated sellers selling a 3 bd 2 ba modular home, 1500 sq ft. It's located in a once popular oil field town, outskirts of Colorado. The husband got a job 155 miles away and that's the motivation.

They refinanced on an FHA loan and the current amount owed is $150,000.

They just want someone to assume the loan and no money down, just a buyer to assume the loan. The buyer would need decent credit & stable income.

My QUESTION is, HOW COULD I STRUCTURE THIS DEAL TO MAKE A PROFIT OFF BRINGING A BUYER & SELLER TOGETHER? FINDERS FEE? ASSIGNMENT FEE? HOW COULD I, IF POSSIBLE, PROFIT?

Thank you

H.M.

Chances are the loan is not assumable ----- why jump thru the loops the bank is going to hold up for you, and you know probably the bank will not release the original borrower.

I have done lots of subject to transactions ........I don't really care for them due to the problems that exist.

My suggestion is, only if there is a equity or cash flow situation, is to make an offer for the amount of mortgage balance.

Make the offer subject to the existing mortgage with right of possession with a delayed settlement. You could make the settlement to take place in 5-7 years.

During the possession period, rent the property, make mortgage payments directly to the bank (seller to sign a management agreement to be sent to the bank, all info about insurance, increases, decreases and escrow will be forwarded to you)

Hopefully you have a good tenant and the property has gone up in value during the delayed settlement period,

To protect yourself, get a lien and judgment report as well as a bring to date on the title. And have the seller sign a deed to you to be recorded once the property is settled. The unrecorded deed will be held in escrow with escrow instructions.

Charles Parrish

Actually guys, contrary to common belief, ALL FHA loans are assumable, assuming the buyer meets the standard borrower qualifications, as opposed to Conventional loans which are not assumable. This is one of the few advantages of having gotten one in the past, low interest rate, years.

I will chime in with @Bill Gulley here about the valuation. If you are looking at a tax assessed value or Zillow etc, then that value may not be very accurate. Even with that valuation, the loan is only 10% or so below market value. Not enough for you to take a profit and still interest anybody else in the deal. I was surprised to find that my research indicated that FHA loans are, actually assumable. I was under the impression that such assumable loans no longer existed. I've no idea how difficult that process might be but still.......very interesting. But, even if there was a great deal more equity here, I am not sure how you could legally make a profit on this deal. If you start trying to make a profit on both a real estate transaction and a loan transaction without being licensed in either, I fear you are crossing a line that could lead to a very bad ending. Keep in mind this is not legal advise from me.....just a gut premonition.

Wayne and Bill H. are correct. As Bill said, there's no meat on that bone. I believe loan costs are about the same and borrowers qualify as they would for a new loan and paying the difference between the loan amount and sale price. And something in the back of my head is saying FHA doesn't allow seller seconds. I was following Wise there and wasn't correct, assumed they changed (4th mistake this year now, LOL) :)

yes, I agree with not enough to make a profit. I had a feeling from the beginning it wasn't going to be worth it. What about possibly getting a buyer And collecting assignment or finder's fee? Also, why are assumable loan homes hard to find?