When Should A Buyer Utilize A Sub2?
I need to now under what circumstances to use a Lease Option or a Sub2. There's a lot of information on this site but I haven't been able to decide which avenue is better for my situation. Any help will be appreciated. Also, once I get a better understanding of when to apply each strategy, I would like to receive some good resources. It seems John Locke's information is a must have. The bulk of this post was originally posted in the wrong forum. Therefore, I apologize to the few folks who responded to this post in the foreclosure forum. Thanks.
=================================
I am a new investor trying to structure a deal. I have a property I placed a contract on anticipating a certain structure, however things have change.
Please provide advice. I am interested in learning about land trusts or different methods to control the property with little down. Here's the scenario.
Appraised Value - 112,000
Sales Price - 110,000
1st Mortgage (my financing) - 77,000
Loan Payoff (seller) - 73,000
Seller Carryback - 33,000
(The carryback originally was structured to be a forgivable loan)
I would pay closing costs and seller would net difference of loan payoff and my mortgage.
===============================
I was all set to proceed when my mortgage lender called and said underwriting rejected the deal due to a 80% CLTV requirement. They're proposal is:
Mortgage - 77000 (70%)
Seller Finance - 11000 (10%)
Buyer Downpayment - 22000 (20%)
( according to the lender the 22000 would be returned to buyer after closing)
===============================
I don't have 22k to show. I still want to purchase this property. The sellers are flexible as long as they receive between 7-10k. I'm not clear how a land trust works. Can I refinance the property if it is in a land trust? Can I sell the property? Can I rent the property? What other strategies may I use to gain control of the property?
FYI, the loan is assumable, however, I can't qualify because I'm only 14 months removed from a BK discharge. Please advise.
A couple examples of how to do this deal following the guideline you set of $10K to the sellers.
1st, The sellers refinance the property for $83K, then sell to you sub2 (you get deed, take over payments). They get their $10K (83-$73 payoff = $10K) and everyone's happy.
2nd, seller agrees to owner finance for 30-60 days. You go to closing, file your deed, and seller's hold a $83K note for the time period. You go to your mortgage broker and refi the property at 80% of 112K = apprx $89K - payoff to sellers = $6K cash to you. You'll need to know if your mortgage broker has a no seasoning refi loan that you qualify for to do this.
These are simplified, but should give you some ideas.
Roger