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Updated 9 months ago on . Most recent reply

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Sean Bramble
  • Investor
  • United States
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Anyone done a "Morby Method" deal? Zero down creative strategy

Sean Bramble
  • Investor
  • United States
Posted

Heard about this on Pace Morby's Youtube channel - it's a zero down creative strategy that works when 1) the seller is open to seller finance, but 2) needs a sizeable DP for various reasons (i.e., pay off their existing loan, closing costs, and/ or put some cash in their pocket, etc)

There are 2 "legs" of the transaction. My understanding is it works like this:

Example: purchase price = $1M, seller still owes $200K, seller also needs addl $150K cash at close for whatever reason. But the buyer wants the property at zero down.

First leg:

-- Buyer secures a loan (1st position) for $350K and sends to title company (this is the amount needed to pay off sellers loan + their required cash at close)

-- Buyer also sends $650K cash to the title company (can put in your own cash, or do a temp loan from a transactional lender)

-- First leg of txn is now complete, and the $1M stays at the title company (this is bc you customized escrow instructions upfront to instruct them how to disperse money before escrow began)

Second leg:

-- Buyer and Seller enter into an agreement through an LLC which allows them both to be on title, and seller agrees to seller finance the buyer $650K of the purchase price (on whatever terms they agreed on). Being on title protects the seller from the buyer defaulting - it seems this is an alternative to "officially" putting them in a 2nd position)

-- Title company sends seller the $350K they require

-- Title company sends buyer back $650K (which they can use to pay off their transactional lender if they used one)

So now the seller is happy bc they got the $350K they needed, the buyer is happy bc they acquired a property for zero dollars out-of-pocket, and from what I understand the 1st position lender is happy bc due the LLC arrangement the seller finance component is not technically considered a second lien on the property. Plus all parties were protected throughout the entire transaction through the title company.

Have any of you completed a deal w/ this method? Am I understanding this right? I would love to hear your thoughts on the pros/ cons/ risks involved

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Joe S.
#4 Innovative Strategies Contributor
  • Investor
  • San Antonio
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Joe S.
#4 Innovative Strategies Contributor
  • Investor
  • San Antonio
Replied

Pace has an agenda to make it sound easy.

Nothing down does not happen very often and I’ve been doing sub2 for years brother. Of course I’m not selling you a course or Mentorship so I have no reason to ham it up. Even the few no money down deals I have done wasn’t really no money down deals, because I spent thousands upon thousands of dollars in marketing  and typically I had to do some sort of rehab to the property once I got it.

The last Sub2 deal idea I had to give the seller $17,000, pay all the closing cost, repaint the whole house, and make payments on the thing three months while I was getting it ready.

The one before that the guy was behind almost $7000, I had to change the carpet, I painted the whole house, I made a number of payments while I was getting it ready, and I paid the closing cost, and I probably spent close to $7000 on a marketing campaign .

  • Joe S.
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