Assuming a loan, split closing?

[Ryan Daigle]

Hi BP,

I'm close to executing a deal for an off market property that seems to be rather complex, so I'd love a second set of eyes to make sure I'm not unnecessarily exposing myself to risk.

Here's the deal: I'm purchasing a property procured by a wholesaler that has a loan that's currently delinquent and headed to foreclosure. The intent of the deal is to get the loan in good-standing so the owner doesn't have to foreclose, which I will then assume payments on as I take ownership of the property.

An additional wrinkle is that, due to liquidity constraints on my end, I only have half the amount available now, with more in a week. And since they need to avoid foreclosure now, the transaction has to be split to match my liquidity.

Here's the sequence as I understand it:

1. Day 1: I put down $15K (which brings the loan current) and sign a purchase and sell agreement, contingent on the seller closing in 10 days and contingent upon the assumed loan being in good standing.

2. Day 10: I put down the final amount and sign a contract to assume the loan payments. I also get a power of attorney over the loan and the property (so I can administer both), along with the deed to the property.

3. Day 180: I refinance the loan using my own lender, becoming the person of record on the loan and getting to a "standard" state.

Does anybody have experience assuming loan payments - where the seller remains on record for the loan but I'm making the payments (this is how the process has been described to me with this lender)?

Additionally, am I at risk between day 1 and 10, where a chunk of my capital has been handed over but I don't have any stake in the property yet? Any other risks to this type of transaction?

It all seems a bit hairy so looking for another's evaluation. Thanks!