Possible first deal??? Advice please!! Land contracts?? No equity...

[Erin Elam]

Hello BP,

So I made an offer to a seller on CL about a month ago - it has been listed for quite a while. He ended up telling me there is still a mortgage on the home and told me the amount. I told him I wouldn't be in a position to purchase a home with $0 equity but if he wanted to give me his contact information I would see if I could get a realtor associate in contact with him.

He didn't respond - I moved on.

Well tonight I received an email from him asking if I was still interested in his home. I began to google what options there are and came across land deeds and negotiating a short sale with the bank. The short sale option I saw listed on CRE Online was a $500 course - needless to say I'm not buying that. In purchasing my personal residence my realtor told me short sales are a mess.

So I need some advice. If the seller gave the bank authority to talk to me should I go for it and see if they will negotiate a lower price? Since the bank is involved I've read banks won't let you wholesale a property most of the time right? But why not? No skin off their back either way right? They get the funds they agreed on so why would they care if I assign the contract to someone else?

Also I have been reading over land contracts/contracts to deed but I don't really understand them. Can someone explain it step by step? I read about downpayments being made and a contract term usually 2-5 years for the buyer to complete the terms of the contract before the balloon payment is due - but I don't understand how I could use that strategy to wholesale a home. If there is no equity how could I make a profit on the spread between the downpayment the seller receives and the downpayment the buyer gives (ignoring the obvious calculation)? What is the downpayment for? 

Is this how it works: 1. Seller agrees to keep current financing in place

2. I give him a downpayment which acts like earnest money for me to have the right to sale the house 

3. Contract is for installment payments for a certain length of time -> title stays in sellers name but I am responsible for payments, repairs, insurance (or is that all dependent on what is in contract??) .. Also would I start making monthly payments right away or is the seller supposed to use the DP towards the mortgage?

4. I advertise the property to buyers for the mortgage plus my fee but I just give the buyer a higher downpayment amount to compensate for my fee?

5. Buyer found pays entire price advertised

6. I take my money, give the rest to the seller (or do I personally pay off bank?)

7. Title is transferred to me and I transfer to buyer? Or am I then able to just assign contract to buyer if seller signs an assignment agreement?

As I'm sure you can tell now this seems a little over my head but I'm in this to learn and grow so if somebody else could learn it, so can I ... I just need a little (LOT) of guidance.

Any and all help, insight, advice will be most appreciated.

Erin