Seller financing offers

[Xavier Xthrax]

I am thinking about sending out offers to buy property were I offer to make payments for the deed to land. So at the closing I would receive the deed and then start making payments.

To make this happen I realize I need to offer a sale agreement with a note (with my terms).

My question is would I need anything else and long as the property is free and clear? Maybe a mortgage?

Thanks for your help.

[Jeff Copeland]

The standard Florida FAR/BAR As-Is Contract has an option (paragraph 8.d) for seller financing, and a seller financing addendum that outlines proposed seller financing terms when you make an offer. So it really is as simple as making an offer that proposes specific seller financing terms.

Once the offer/contract is signed, take it to a title company, and they'll handle the rest. 

Note that you would be responsible for all mortgage costs, to include preparation of the mortgage and note by an attorney (probably $500-1000, due at closing, in addition to other customary closing costs - which is no different from using a mortgage company and paying origination charges). But the doc prep would be coordinated by the title company.

Note that seller financing isn't as easy to find as one might assume. The seller is usually limited by their current mortgage balances, which would need to be paid off at closing (presumably out of your down payment). 

For example, If I wanted to sell you my $300k home for $275k with seller financing, and I owe $120k on my first mortgage, and $30k on a HELOC, the least I can take as a down payment from you is $150k (plus closing costs). In which case, I'd walk away from closing with no cash, and nothing but the mortgage note. 

[Wilson Lee]

The seller should demand a mortgage be filed.  You will also need to be in compliance with Dodd-Frank rules for owner financing. 

If you find a deal where the seller still has a mortgage on it, Try a lease with a separate purchase agreement. Scheduled the closing far off when his mortgage is paid for. That would avoid any messy subject to purchases that trigger the dew on sale clause.

[Xavier Xthrax]

Originally posted by @Wilson Lee:

The seller should demand a mortgage be filed.  You will also need to be in compliance with Dodd-Frank rules for owner financing. 

If you find a deal where the seller still has a mortgage on it, Try a lease with a separate purchase agreement. Scheduled the closing far off when his mortgage is paid for. That would avoid any messy subject to purchases that trigger the dew on sale clause.

I was under the the assumption that The Dodd-Frank Act applies only to residential mortgage loans, so Dodd-Frank does not apply to loans secured by vacant land, which I am targeting. And I dont think it applies to non-consumer buyers, even if the property being purchased is a residential property. Such as a corporations which Is my vehicle for investment.

I could be wrong but thats what I found in my research.

[Xavier Xthrax]

Originally posted by @Jeff Copeland:

The standard Florida FAR/BAR As-Is Contract has an option (paragraph 8.d) for seller financing, and a seller financing addendum that outlines proposed seller financing terms when you make an offer. So it really is as simple as making an offer that proposes specific seller financing terms.

Once the offer/contract is signed, take it to a title company, and they'll handle the rest. 

Note that you would be responsible for all mortgage costs, to include preparation of the mortgage and note by an attorney (probably $500-1000, due at closing, in addition to other customary closing costs - which is no different from using a mortgage company and paying origination charges). But the doc prep would be coordinated by the title company.

Note that seller financing isn't as easy to find as one might assume. The seller is usually limited by their current mortgage balances, which would need to be paid off at closing (presumably out of your down payment). 

For example, If I wanted to sell you my $300k home for $275k with seller financing, and I owe $120k on my first mortgage, and $30k on a HELOC, the least I can take as a down payment from you is $150k (plus closing costs). In which case, I'd walk away from closing with no cash, and nothing but the mortgage note. 

 Makes sense. So as far as the title company is considered. I only need a sale agreement with a note, but not necessary a mortgage unless the seller asks for one, which is highly likely.

[Anthony Dooley]

@Xavier Xthrax you are correct, Dodd Frank doesn't apply to raw land deals. That wasn't clear in your original post. @Jay Hinrichs has extensive experience in this type of deal. Typically, you would want to buy the land for $.50 on the dollar, then sell it using owner financing. I'm not sure how you plan to make money by purchasing with owner financing. There wouldn't be a discount on the buying end of it.

[Jay Hinrichs]

@Anthony Dooley  common in the land game since you can't get bank financing to owner finance

then you do a wrap when you sell.. or they also call them AITDs  ( all inclusive Trust Deed ) in trust deed states.. Not sure if FLA uses both mortgage and trust deeds I have only seen mortgages in that state.

@Wilson Lee  dodd Frank does not apply in this scenario.

this may be a situation were land contract would be appropriate but do check with legal council on that one.

[Xavier Xthrax]

Originally posted by @Anthony Dooley:

@Xavier Xthrax you are correct, Dodd Frank doesn't apply to raw land deals. That wasn't clear in your original post. @Jay Hinrichs has extensive experience in this type of deal. Typically, you would want to buy the land for $.50 on the dollar, then sell it using owner financing. I'm not sure how you plan to make money by purchasing with owner financing. There wouldn't be a discount on the buying end of it.

You are correct, I forgot to mention I was targeting vacant land. 

Sorry about that, slightly important ;-)

[Anthony Dooley]

Unless the plan is to develop the land or raise something on it, the only way that I see making money is in hopes that you find a bigger fool to pay more than paid for it. So you would either have to get a good deal going in, the land would have to appreciate, which can take decades, re-zone it for commercial maybe, or just market it well to find another buyer. I guess it's just not my niche, so it's hard to see the upside here.

[Jay Hinrichs]

@Anthony Dooley  for the greater fool theory  watch Glenn Garry Glen Ross the movie.

the land game was a huge one in FLA and still is.. just like it was huge out here in the West.

been going on for 100 plus years.

also you see a few of the guys that teach this stuff.. guru's who sell how to books.. like land geek and others .. its and old old strategy  but it works for those that can stick it out.. I have done quite well on land personally over the years..

Before cash flow became a thing.. many people that were starting in real estate actually bought land to hold.. and a lot of foreigners bought cheap land to hold..

now with financing the way it is and CASH FLOW is KING mantra the focus for those with 20 to 30k instead of paying cash for some dirt they buy a rental and try their hand and landlording..

[Anthony Dooley]

@Jay Hinrichs I guess it's a slow dime over a quick nickel. Rural land in the south is very cheap and almost never appreciates in value. Growing timber is about all it's good for, and that is a very slow dime. I would buy land to preserve capital at some point when I'm making more than I can spend. I would grow pecans or something in GA or raise a special breed of el paca. LOL