Creative Or Crazy? Balloon Payment Of Land, Not Money
People around my rural area like their land more than their house, and I need to figure out a way to work with that. One motivated (pre-foreclosure) seller has 1998 double wide MH on basement with barn, pasture, and outbuildings on 20 acres, FMV $180K or so, seller owes $110k. Bank mortgage is on home and land.
Seller wants to keep 10 of the 20 acres (I’d like it too). To separate it would involve lender’s OK and release, which could be messy in a Sub2 deal. I thought to get the deed, for their equity I could offer them a note/balloon payment, not for money but for the ten acres they want to keep. I could put it in the form of an exclusive option to buy (back) the ten acres for a token payment, not exercisable for 2-3 years, and/or upon my buyer’s refi. At that point everything’s on the table and the original lender should be getting paid off anyway in the course of the refi. Perhaps it’s a paperwork nightmare. Anyone ever experience such an oddity? What did you do? I’m trying to think creatively, but am I succeeding?
Yep, you're thinking creatively. And there is no reason you can't create the land option as long as its possible to actually divide the property. You want to check with the appropriate authorities. You might even get the lender to agree to the division now as long as they were first lien on both properties. This would protect you in case at some future point it became impossible to split the land ownership.
You are, of course creating a future oblilgation to deliver something. That means risk because you cannot control, exactly, what might happen in the interrum.
have seller split the property first.
