Owner Financing Clarification

[Neiman Lee]

How would this situation work? 

Was wanting a little clarity for owner financing. I understand that the owner of a property that I want to buy can actually fund the purchase where I would make monthly payments to the seller rather than a bank if they own the home free and clear( no existing mortgage). Lets say the owner of the property still has an open mortgage on a property and I would like to buy and finance the deal through the seller. The seller has to pay the loan back to the lender to avoid foreclosure. How would the seller pay the loan back and avoid foreclosure? Lets say the seller has paid $50K of a $100K mortgage. Does the seller have to come up with another $50K?

[Bradley Laddusaw]

If this is a fix and flip strategy you are looking to implement, you should be able to get a low LTV purchase loan from a private lender/hard money lender that would cover the balance due. The current lien holder for the seller would be paid in full through the close of escrow, then the seller could carry the balance junior to your lender. This strategy works if there is a value add play because you do not want to be leveraged up 100% of as is value with no value add potential. Our clients implement this strategy quite a bit on their flips as for the right seller, it solves a couple different issues.

If the bank had an initial loan of $100,000 that has been paid down $50,000 over the years, ideally the value of the property would be sitting between $125,000 and $150,000. If your requested loan amount ends up being $60,000 on a $125,000 to $150,000 purchase price, that is sub 50% LTV and I would expect you to have many options on the table if this is a true purchase.