Why would a seller agree to an AITD?

[Account Closed]

I'm about to start shopping for a multi-family property in Los Angeles (most likely 5+ units). Someone suggested looking into an AITD purchase. Did some reading and can see how it benefits the buyer, but can't understand why a seller would do this at all.

Any ideas? Thx!

[Chad Carson]

@Account Closed Good question and BIG topic.

I have sold with wrap-around mortgages in South Carolina (same concept as AITD) several times.

For me it had huge benefits, because I kept my underlying financing (from a seller typically) in place instead of paying off great terms at 5%, 4%, or even 0%.

The play for me was a big income spread, often $3-500/month on $100,000 deals and recouping some of my equity with the buyer's down payment.

I was making money on a margin, just like a bank does. If I sell to you at 7% and my underlying loan is at 4% I make a 3% spread on the amount of my underlying loan and I make 7% on any equity I have above that.

The ROI on these deals is off the chart, but of course I have risks if the buyer defaults because I have to keep paying my loan until I can foreclose and get the property back. Big reserves are a must.

Another big risk for the seller is the due on sale clause if the underlying mortgage has one. Most of mine did not because I bought with seller financing, but I did wrap a couple of mortgages that had due on sale clauses with the knowledge that I might have to pay them off if they were called due.