Contract Question... How to Detail Terms...

[Ben Startz]

My first post as an BP Member... let's see how this goes!

Finalizing an agreement on an owner carry deal on an 8-plex with 50% down... and the rest of the remaining balance financed over 36 months at 0% (yep... 0% ;;). The NOI and Cap Rate (considering tax, maint, capital costs, etc.) is very positive.

My question is actually on the instrument/contract to spell out the deal.... and ensure that the title/deed is held in escrow (or some other form of trust) over the 36 months. Should the terms be spelled out in a basic RE contract, with accompanying promissory note? Or is there another form of "contract" used in Owner Carry deals?

[Wayne Brooks]

1) Use a local RE attorney, before you sign any documents/purchase agreements.

As a buyer, I want a straight sale, with seller carrying a mortgage, deed transferred to me at closing. There are some issues with 0%, as the IRS imputes a minimum interest on the seller, and buyer, for income tax purposes. With the attorney, do the contract first, then probably a MLO to originate the loan/draft the note. Perhaps you need to agree on a specific mortgage document ie. Fannie Mae, etc. in the purchase contract, to eliminate issues later.

Others here will have better info on seller carry deals.