Seller financing mortgage takeover

[Zane Clarke]

Hello, 

has anyone structured a deal with seller financing in which you take over the mortgage for the seller? 
How does the seller benefit or recoup any of the equity they’ve already put into the house?

Thanks for your time!

[Louis Davis]

@Zane Clarke 

Seller finance is a swiss army knife with many different weapons.  You have to figure out which tool to use and to do that, you have to have a lot of knowledge about why the seller is looking to sell and the back story of the property. There are 2 different ways to do seller finance: 

1. Owner carry: This is typically used when the seller owns the property free and clear. This way the seller can act as the bank and take monthly payments on the property. For example: Seller wants $100k, property is worth $150k and little rehab is needed on it. I will explain to the seller that I can pay them $80k cash and close in 30 days or $100k over time and some time in the future I will get the property refinanced and cash him/her out. 

2. Owner Finance: This is typically used when the seller has a mortgage on the property and has equity as well. I use this method when I know there is spread in between what the seller wants and how much is owed on the property. You can do 1 of 2 things. 

Option 1:  Calculate what the seller is asking and how much he owes. For example, Seller owes $50k on the house and he is asking $100k. Naturally he wants to walk away with $50k after having the mortgage paid off. What I would do is offer $50k and take over his payments. Now I get a property that is in decent shape with a lot of spread at a highly discounted price. 

Option 2: Using the same example. Seller wants $100k for the property. Owes $50k and property is worth $150k. I will inform the seller that I can pay them cash at $80k and close within 30 days or take over their payments, build equity in the property and sell it on the MLS for full value. Therefor, seller's mortgage is paid, he gets his $50k and he didn't have to do any work. Benefit for me is that I only put up money to rehab the property and listed it. Light work....

It's a long answer but there is no short answer when it comes to "seller finance." Reach out if any of this confused you. 

Louis