First attempt at selling a property using a wrap mortgage

[Ryan Russell]

I'd love to get some feedback on the deal I'm currently trying to put together. I recently purchased a property for $70,000. I immediately listed it for sale at $99,900. I received an offer 5 days after I purchased it from a buyer requesting I owner finance it. He has a $25,000 down payment. I countered their offer with the below terms which should net after all costs to close about $94,000. ----"$99,900 purchase price ----$25,000 down payment from buyer ----$1,000 buyer closing costs paid ----seller Financed mortgage of $75,000 at 7% interest on a 10 or 15 year am (whichever buyer would prefer). ----Buyer would pay for insurance (with me as co-insured), pay for annual taxes, and make any repairs or complete any maintenance as needed. Basically we would treat this as if it was a traditional financed deal." I have a 50/50 partner. Our net on this deal would be approximately $23,500 total or $11,750 each. Partner has no interest in the owner carry but is happy to make 50% of net on an extremely quick turn. We paid cash when purchased. Podcast #70 was awesome and provided me the push I needed to try an owner finance deal. So, I would take my $11,750 profit and keep approx $5,000. I'd then take $5,000 and use to pay down $70,000 initial purchase and finance $65,000 at 4.5% interest, using the same amortization as buyer selected. The remaining $1,750 used for closing costs on my loan. It should net me about a $175 monthly residual. I'd close both mortgages on the same day. My banker and buyer are both aware of each other's mortgages. Am I missing anything here? Would you keep entire $10,000 and finance $70,000 instead? Again, I'd love to get some feedback as I don't want to do anything out of line. Thanks in advance.

[Curt Smith]

There's alot of threads on how to owner finance on BP.

Joe's inference re will the house appraise for $99k is that DF attacked investors who unscrupulously marked up the value of a property with the thinking that because they owner financed all is ok. So the authors of DF put in that an appraisal must be included at no cost to the borrower... Just loosely quoting the regs.

.- You can't take a 1003 app yourself that is now the exclusive duty of the Licensed Mortgage Originator. But I do sit down with the buyer and go over all their income and debt adding in this mortgage payment and make sure they are better than 43% DTI (debt to income which is googleable).

- Call around to the closing Attorneys asking for a LMO licensed mortgage orignator who you run this borrower through with the mortgage terms to verify the borrowers ability to repay (pull w2's, bank statements, 1040's etc IE a full doc verification). I pay around $750 for a LMO here in GA

- In bank provided mortgage closing borrowers typically sign an afadavit that they didn't lie about their financials. In seller carried under DF a similar afadavit should be added to the signing packet that the borrower did not mis represent their financials etc etc that a LMO was used per CFPB rules, the seller is held harmless if the borrower did mis-represent their financials etc etc

- then post closing use a loan servicer. I used the biggest and cheapest, trustfci.com. You'll probably escrow taxes and insurance so around $30/mo. The next OF deal I'll ask the LMO/closing autorney to add the servicing fee to the borrower paid monthly mortgage amount since it's there to protect them in the first place.