Is it possible to buy using seller financing them imediatley sell using the same strategy?

Question

I've been hearing a couple gurus on Youtube talk about approaching home buyers in need of quick cash and ready to sell now about seller financing. You explain what it is, the benefits and the risks. I've gone this far but haven't had a chance to close anything yet, I just started talking to sellers last week... As stated, most of these sellers want cash right now and with seller financing that's not possible unless I could offer a down payment, and I can't offer much.

The gurus strategy states that you will tell the seller that you can sell their property quick using a wrap around seller finance mortgage thus getting the original seller the money... quickly. To do this you'd need to have a list of buyers or be able to market through various mediums that seller financing is available to anyone that can't get traditional financing. I believe a Lease Option is another exit strategy in this operation.

I've been looking up local title companies in the area and plan on interviewing them this coming week to see if they can make this happen on short notice and repeatedly. I've also stuffed 50 yellow letter envelopes to send to addresses I've found on Realtor.com.

This sounds like a sure thing to me but I'm just a newbie. Is this legit?

Tom Goans · Answer

Bill will probably be able to verify this, but in many instances, if you assume a loan, the original borrower remains liable for the payment of the loan.

Mike P. · Answer

Thanks Bill, I will heed that advice. Do you know of any articles, guides or documents that explain how to analyze a wholesale deal and what a fee structure should be?

Bill Gulley · Answer

Mike Poulliott,

Tom made a good point, always use the K.I.S.S. method, don't make things more complicated than necessary.

Stay away from gurus!

Is it possible to assume a seller financed deal? Yes, with a big BUT!

There are only a few on BP that I know of that could do such a deal safely and legally and everyone of them are mortgage brokers or in finance, there are no "investors" that I could suggest that you follow thier ideas on creating a seller financed note that could be assumed and it's an area to avoid. There are many here who won't admit being in over thier head, some don't know they are and some do know and  don't care! In fact, there are a couple that make comments just to cause trouble as if it's a game to see if they can get some newbie's head chopped off or just to harrass.

Get to know folks here, look at thier profiles and see where thier interests are, what is thier agenda, connect with those you deem ethical, responsible and who have expertise, there are many here on BP who can guide you. Read some threads on seller financing, the pitfallsand the advanatges. It's a great tool to use but it absolutely is not somethig that someone who has no financing knowledge can do safely, legally and ethically.    Sorry for the rant, if you want seller financing, get with an attorney, probably better to get with a mortgage originator. :)

Mike P. · Answer

I had no intention of changing the rents on the folks that are currently in the house, this was part of our negotiation while we were discussing seller financing. I would have no way of telling what a wholesale buyer would do though and the tenants understand that possibility.

Do Banks use the Due on Sale clause in this scenario? I've heard that Deed of Trusts include everything under the sun to protect banks, like you can't store gas on your property, you can't lease your own property... Basically any vague language a team of lawyer could use to protect a bank is now included in these DTs. Of course seller financing is legal and so is leasing and storing gas on your property.

Matt Devincenzo · Answer

Now Tom Goans I don't see that as being what he said at all. He stated the current tenants realize they're below market at $500, and expect it will likely change after a sale. And then he said market is $700. All of this was in his summary of possibly wholesaling, so the actions taken upon sale would be completely up to the buyer. And it all works out to a business decision, if the buyers business is he wants full market and the associated turnover; that is fair and legal as is keeping the tenants there and giving them a slightly below market rate but not 30% below.

Tom Goans · Answer

So, your plan is to put the screws to the tenants once the present owner is out of the picture. Extremely bad idea for many reasons and one that a prudent investor will dismiss.

Tom Goans · Answer

K.I.S.S. There are more investment opportunities out there than you have money or time.

That is what my father always repeated to me when I was trying to manufacture an investment opportunity.

I did not take the time to thoroughly read all the replies, but most Deeds of Trusts contain a "Due on Sale" clause since the 1980s. A wrap can trigger this clause and turn your pot of gold into mud.

K.I.S.S.

Mike P. · Answer

Fred, You're right, wholesaling is a lot safer and the best way to go for what I'm trying to accomplish. I hadn't researched wholesaling until just now because you brought it up. I wonder if it could help me out with a prior deal I had to pass up this morning.

The sellers house is owned free and clear, she is selling due to a divorce and is very motivated. We agreed to terms for seller financing but then she brought up the issue of a $12k tax lien on the property. The lien made me terminate the deal.

Would it be possible to get this $47,000 SFR under contract for a $10k-$12k discount then sell the contract to an investor? This is a turnkey rental with tenants in place. The tenants are family friends and only pay $500 and they don't expect to be offered such rates once it's sold, the place could go for $700... a 10%+ CAP rate

Fred Ramos · Answer

Hi Mike,

Instead of going through all that, why not try to wholesale the property?
this means no money out of your pocket other than the earnest money (usually about 1%) and an option period (about $10 a day).
Just mark it up a little ($2k - $5K) and transfer the contract to an investor.
Just make sure that the numbers will work for an investor with the mark-up.
Seller financing is great (We have one property seller financed) but I would think that as soon as the deed to the property is transferred, the ex-owner may request the loan to be paid in full  (I know banks will, it is called the due on sale clause). I don't know, I've seen some these seller financed deals be a little shady.....Do things right (not insinuating anything) and do a proper closing. you can open yourself up to a whole lot of trouble if something goes wrong while collecting payment for the property while paying another person or entity off. 
Gurus?....to me this is a self designated title that few if any, ever live up to.

Good luck Mike!

Wayne Brooks · Answer

Most buyers looking for owner financing can't qualify for normal financing, and probably won't in two years.  When the end buyer stops paying, you have to foreclose, not evict, while still paying the seller.  
Dean, you get sellers to allow you to assign to anyone you want, and walk away with no obligation?