Wrap Around or Seller Finance?

[Sarah S.]

I just had a look a property I am interested in. It is priced well in spite of needed repairs. Seller used to be an Investor so offered me Seller Financing but just called back and said he would not be able to tell me how to do it but that he would accept a wrap around on the home.

I am way to new in the investing world to have any idea what a wrap around is but he said look into it. Can someone explain to me how that works exactly and it is a better option that seller financing? I will be researching after posting this but hope someone can guide me. 

Thanks.

[Amanda G.]

Hey Sarah,

So a wrap is when the seller wraps their current loan into the deal, similar to a "subject to existing financing." He can't finance it because he doesn't own it outright, he has a loan on it. 
If he really wants to do this, then he needs to lay out the terms of his current loan. If he is a year into a loan at 10% interest, that's likely to be bad. But if he is 15 years into a loan at 6%, you could be building some nice equity.
If you go forward, be sure to get a contract that says YOU PAY THE LOAN DIRECTLY, and then pay him whatever else you agree. If you pay it directly to him, he could decide not to pay on the loan and the mortgage company could foreclose on you. 
I haven't done one of these, so you'll need someone else to get you through all the details. Good luck!