All Forum Posts by: Will Barnard

Keep in mind that the seller should want a down payment to keep in case you default, plus gives them an upfront profit on the sale, plus they have the interest spread as monthly profit (cash flow), and should also want a ballon payment in 2-5 years which would require you to refi at that time or pay off in cash, giving the seller the balance of their proceeds.

You and the seller arrange the wrap. He/she keeps their mortgage in place, gives you a mortagage at a higher interest rate and they kkep the spread and are able to sell the house. You do not need an LLC or land trsut to do so, but it does help conceal the sale and thus the due on sales clause.
Their is no additional risk to the seller (and much much less than a sub to) and no risk to you (at least not in excess from the mortgage an risks involve in any investment)

Kim,
A possibly alternative for you is to have the seller sell the property to you via a wrap mortgage. The original loan stays in place, the tiltle transfers to you, and the seller holds a lein against the property. In addition, the seller gives you a "new mortgage" at an interest rate higher than the original (the seller keeps the spread" and thus has less risk and more recourse in case you default (they simply take the home back and keep up the mortgage they have been paying.) A great way to accomplish this and help avoid the due on sale is to have the seller place the property into a single entity LLC or a land trust, and then sell 100% of the LLC shares to you with the new mortgage or in the case of the land trust, transfer the beneficial interests in the property.

In addition to Jason's reply, you MUST disclose to the lender that an assignment fee will be paid in cash outside of closing. Getting paid, or paying someone outside of closing without the banks knowledge is mortgage fraud! I just had the deputy DA of Los Angeles on my radio show talking about this very thing and they are cracking down on violators. You can here the show via podcasts which can be found on my website.

Assuming you are looking for an end-user (owner occupant) buyer, I suggest offering some creative lending benefits to the potential buyer. In this tight lending market, there are many who can not fully qualify for traditional loans, therefore your market is reduced. Increase that market with owner financing, or carry a note for a second, or offer a lease option.

Jason,
We can go back and forth on this forever, which I intend not to do, so I will clarify "my post" for the last time, especially considering this thread has got new life from over 2 months ago.
You say, "the ONLY reason to be in biz is $." I say, there is never an "ONLY" reason. I did state that profits are necessary and the primary focus in order to stay in biz. That said, the other factors, such as freedom, lifestyle, etc. etc. are "other" reasons to be in this biz.
We all get your point that $ is necessary, it goes without saying, to say it is the only reason is where I and others disagree with you.

Kim,
If you post the exact details of the deal you are looking at, perhaps we can throw some creative ideas your way that would make sense for your situation (& the seller's).

Your buyer's lender will not have a problem with the fact that the contract has been assigned, however, in most cases today, they will only consider the original purchase amount in the original contract and therefore, any assignment fee will need to be paid by the end buyer in cash.

Ryan,
You need to realize that the seller has already negotiated a listing contract with the listing agent and that contract most likely states that the seller will pay a commission of 6% to the listing agent. In addition, the contract probably also states that the listing agent will cooperate with other brokers and offer a buyer's agent 3% of the total 6% commission. To negotiate with your "buyer's agent" now is futile as the seller is paying the fee and has plugged that figure into the calculations of their price. Next time, before your agent has already shown you properties and done work on your behalf, negotiate what you are willing to have them receive before you go out looking. This way (if you both agreed on 2%) and you find a property where the seller's agent is offering 3% to the buyer's agent, you can use the reduced agent fee on your side of 1% to reduce the asking price during negotiations. Of course you can also negotiate to reduce the price on many other items as well. Knowing how to negotiate contracts is instrumental in any RE investing business.

There is a RE investor club in OC - Anaheim, CA as well as Los Angeles starting in September 08
Go to www.nakedrealestateinvestorsclub.com
Club owner is Rosie Nieto who is also a BP member.