All Forum Posts by: Dory Peters

So, what's the status on your deal?

Did the seller go for the seller financing for this deal?

I know this is kind of late, but maybe it will help you (or someone else) next time.

Some other ways to further sweeten that deal--for you and the seller--is to suggest the seller financing with a balloon payment (in 1-2 years--to refinance the seller out of the deal), and with an interest "buy-down" (see the following link for more info http://www.321advantage.com/sellers-types-of-buydowns).

I'm comfortable selling using a lease-option, wrap, land contract, or other forms of creative financing; however, I prefer to purchase using a wrap--unless I'm purchasing a large commercial property that require some major rehab to get the vacant units rentable. In that case, I might prefer to use an option as my first choice, or maybe a lease-option as my second choice--unless I could get the property with a wrap and deferred or abated payments.

Jon,

I'm using the legal terms as they'll appear in many contracts (whether they're the state approved contracts that most realtors use or otherwise).

loan assumption = same note
all-inclusive trust deed or subject-to or wrap = new note

I'm providing several links to help clear this up.


assumption related reference:
http://www.allbusiness.com/glossaries/assumption/4943780-1.html
http://definitions.uslegal.com/a/assumable-mortgage/

subject-to related references:
http://research.lawyers.com/glossary/wrap-around-mortgage.html
http://faculty.law.pitt.edu/fox/ltf/ltf07/wrapmtg.htm
http://www.realpropertyprofits.com/content/wrap-around-mortgage.php

Actually, a wrap is another name for a "subject-to" mortgage or all-inclusive trust deed.

I have to respectfully disagree with Nick's and Jon's statements about the seller lacking any control over the subject-to mortgage.

First, the seller can set up an escrow service account to handle the payments. This is safer for both the borrower and seller, because the escrow servicing agent takes the payment, pays the mortgage, and pays the seller his/her portion of the payment. Also, if the buyer is late or defaults, the servicing company can immediately update the seller.

Second, the seller's attorney could structure the agreement, so that the buyer's title is held deed in-lieu in the escrow account until the mortgage has been paid off. That attorney can also add verbiage to the agreement that specifies exactly what happens if/when the buyer is late or defaults.

Third, the seller could also establish an impound account, and require the buyer to escrow enough cash (which could also be part of the down-payment) in that account so that the seller may endure the foreclosure process without taking as large of a loss (if any).

The list goes on, . . . but the point is that there's definitely a way to structure a subject-to mortgage in a way that's safe for buyers and sellers alike.