Creative strategies with an assumable loan

[Albert A.]

Hello,

There's a SFH in California (Central valley) that's listed for around $365k. It was appraised around there as well. It's been listed for 100+ days. The owner is moving out and is currently in escrow to buy another property and says they need about $160k cash as a downpayment. Apparently if they don't sell their current house now, they won't mind falling out of escrow on the new property. The current owners purchased it a few years ago and still have an open mortgage. This is my first potential good deal that I've found and I would love to have it as my first win.

The unique aspect of this property is the converted garage into 2 bedrooms. The home is a 5 bed and 3 bath with that conversion, and close to the main college campus.

They may be open to me assuming the loan, which may be FHA, and then I can pay for the rest in 'cash'. The FHA loan balance is estimated around 160k and was initially 180k. The rate may be at 4.5% (waiting for confirmation on these).

Apparently the owner has to get at least 150-160k in cash to use as a down payment and won't be able to do any seller financing for that large sum..is there any way I can make this deal work with some other strategy? I can't do 150-160k in cash out of my own pocket and they seemed adamant about receiving that much in cash. The most plausible solution I can think of are the following.

Assuming 360k purchase price:

Assume $160k FHA @ 4.5%

Offer $120k as upfront downpayment - I would find a lender or open a loan with a bank. This would unfortunately mean I'd get high interest rates.

Seller finance remaining 80k @ a low interest rate preferably

Have seller cover closing costs.

Alternatively I would increase the cash offer if I'm going to get a loan either way, and then therefore decrease the seller financed portion.

Is there any other strategy I can utilize?

[Account Closed]

Quote from @Albert A.:

Hello,

There's a SFH in California (Central valley) that's listed for around $365k. It was appraised around there as well. It's been listed for 100+ days. The owner is moving out and is currently in escrow to buy another property and says they need about $160k cash as a downpayment. Apparently if they don't sell their current house now, they won't mind falling out of escrow on the new property. The current owners purchased it a few years ago and still have an open mortgage. This is my first potential good deal that I've found and I would love to have it as my first win.

The unique aspect of this property is the converted garage into 2 bedrooms. The home is a 5 bed and 3 bath with that conversion, and close to the main college campus.

They may be open to me assuming the loan, which may be FHA, and then I can pay for the rest in 'cash'. The FHA loan balance is estimated around 160k and was initially 180k. The rate may be at 4.5% (waiting for confirmation on these).

Apparently the owner has to get at least 150-160k in cash to use as a down payment and won't be able to do any seller financing for that large sum..is there any way I can make this deal work with some other strategy? I can't do 150-160k in cash out of my own pocket and they seemed adamant about receiving that much in cash. The most plausible solution I can think of are the following.

Assuming 360k purchase price:

Assume $160k FHA @ 4.5%

Offer $120k as upfront downpayment - I would find a lender or open a loan with a bank. This would unfortunately mean I'd get high interest rates.

Seller finance remaining 80k @ a low interest rate preferably

Have seller cover closing costs.

Alternatively I would increase the cash offer if I'm going to get a loan either way, and then therefore decrease the seller financed portion.

Is there any other strategy I can utilize?

Well, you are covering a lot of ground there, in your questions. Creative finance is like driving down a country road. When it comes to a "Y" in the road, you have to make a decision. Which way to take. Sometimes you take the wrong one that dead ends and you have to back up to take the other route until you hit another "Y" in the road. This is not freeway driving which is straight, unobstructed and fast.

So, if they HAVE "to get at least 150-160k in cash" how does giving them "$120k as up front down payment" get them where they want to be?

I'm not aware of anyone who understands lending, that will lend in 2nd position on a Subject To. It is one of the most foolhardy things someone can do. Yes, I know "gator lenders" say they do that all day long, There also are people who drive drunk too. That doesn't make them a genius. It eventually catches up with them.

"The unique aspect of this property is the converted garage into 2 bedrooms."
Have you checked with the city/county to see if the conversion was done with permits? Yes, it matters, a lot. It affects the valuation and your potential liability.

If the loan is assumable, and if you get approved by the bank, it will be for the amount owed. You won't get any "cash out".

Obviously, we teach Subject To and Creative Finance if you’ve read any posts I’ve offered, but this one will take putting the thinking cap on. If that is something you want to do, BP provides the link below to leave us a message and we’ll do a deep dive for you.