All Forum Posts by: Caleb Christopher

We write in the terms in the "additional terms" section on the deals we do. I have templates we use nationwide, and my team can probably assist with getting you a good contract drafted. If you search hard enough online, you'll find one you can use. But it's practically a loaded gun, so it's best to connect with an experienced JV partner, consultant, or attorney to make sure it's done right.

I only work creative deals (50+ per month), so I see it all. Most common are subtos and wraps, but we also see novations (Agreement to Rehab and Sell)

I've been speaking at local and online REIAs about creative finance strategies for the sake of awareness. Here's an excerpt from the outline I use for the speaking and to run Q&A:

Seller finance

• Straight Seller Finance
• Executory Contract
  • Contract for Deed
  • Land Contract
  • Agreement for Sale
  • and other names…

Subto

Novation

• Wholetail
• Subtail
• Net Listing

Wraps

• Naked subto vs Mirror/Exact Wrap
• Mirror Wrap
• Equity Wrap
• Rate Wrap

Are you trolling with this post? Controversial headline and no context provided... 

No way.

@Johnny McKeon you've nailed it.
BTW I do Agreement for Sale all the time. Not all of them are created equal, so it's important to get all the right terms and conditions in them. They're very safe if/when you record them in the public records (just like a deed and a deed of trust). They're kind of a super-doc because they grant you beneficial use of the property, establish the price and terms, and your rights and responsibilities... all in one document.

Did you get this nailed down? I'd love to help. Hit me up.

@Sean Williams did you get this figured out?? It looks like you're on target with the bullet points you provided here.

I do this type of deal all the time, feel free to connect with me to discuss more (preferably tag me back in a reply here so I can provide value to everyone with public replies).

You can catch up the arrears, make monthly payments, and either LTR, STR, or wrap-sale it to yet another end buyer for a markup!

You can buy this on a wraparound mortgage. I wrote a BP blog to explain this simply.
There may be a due on sale clause, even in a seller finance note, so caution is advised, but if they're getting paid, why would they call it due on sale and incur the expense to foreclose on you? Overall, DOS is a low risk. This sounds like a great deal

Quote from @Chris Seveney:

Quote from @Cody Sizemore:

I have a property that I am interesting in purchasing, and I have a good relationship with the sellers. I'm considering doing seller financing due to the higher interest rates right now, but they currently have an existing mortgage on it. 

Property sale price is $100k, mortgage is about $60k. How can I legally purchase the house using seller financing, or a wrap around mortgage and set it up so that I come out with the best case scenario? 

 yuo could buy it subject to the existing mortgage, but still need the $40k cash. In the long run you might be better off jkust getting conventional financing if you are gonna live in it, as the interest rate delta on $60k compared to having to put a larger down payment on is probably worth it. 

You aren't required to bring that much cash to closing. For example, the seller can agree to $0 down if they like; the entire purchase price can be financed if the parties agree.
I often see down payments ranging from $0 to 10% of the purchase price, but I only work creative finance deals.
This can be structured as a hybrid (subto + seller finance) or a wrap (seller finance which includes the underlying loan). @Cody Sizemore I wrote an article explaining wraps here: https://www.biggerpockets.com/member-blogs/15497/102003-wrap...

Quote from @Nathan Gesner:

Quote from @Marlon Brillantes:

The only option I see is a mortgage for $200k through a lender, then the Seller finances the other $200k. You have to talk to the seller and the lender to see if they're willing to do this. 

Lenders just don't allow 2nd position liens at COE.

It's not reasonable or required to structure the deal this way anyway. The down payment can absolutely be negotiated directly with the seller. 

This would be a great candidate for a wraparound mortgage: The Seller's debt of $200K remains as the 1st position lien, and either a 2nd position lien for the seller's equity is created, or a new wraparound lien is created which includes and incorporates the first position lien as a part of this new 2nd position lien.

The down payment can be whatever the parties agree to, even $0. The existing lien can stay in place, and no new/additional financing is required. That doesn't mean the parties will agree to do it that way, but the opportunity does exist.

Context & Qualifications: I have run 50+ creative finance transactions per month for over a year.

Quote from @Joe Villeneuve:

As a buyer there's no point in doing SF if the seller has an existing mortgage.  You're going to have to pay a DP at least enough to pay off that mortgage.  What's the point

This is a very unqualified blanket statement that's not objectively true.

 There is a point in doing seller finance when there's an existing mortgage. The first scenario that comes to mind is a mirror wraparound mortgage. If the seller has a good interest rate, you can buy that property with the existing loan in place. That's a good deal you might not otherwise be able to acquire.

The seller would want to seller finance to you (get a 2nd lien position through the wraparound mortgage) because they can foreclose if you default. This acts as a stop-loss for them in case the buyer is a derelict, and limits how far into default it can fall before it's forced to auction to pay off the seller's first mortgage.

(Disclaimer, I do 50+ of these deals per month in the USA, so that's the context I'm speaking from. You should connect with a local RE Attorney, but I can give you some context so you have a more meaningful discussion)

Don't ask the bank. They will tell you "no" if you ask. In most loans transferring title without paying off the existing loan is a default (hence the dreaded due-on-sale clause). HOWEVER, if they're getting paid, there's an extremely low rate of those loans being called due.

In your case, I'd be looking at creating a "wraparound mortgage." You can mark up the interest rate and make a profit on the existing loan as well!

Alternately, you can do a hybrid deal, where you create a separate, 2nd position mortgage for just your equity, while the first mortgage is taken subject to, and the buyer effectively makes 2 monthly payments (one to the bank, one to you).

I just wrote an article to simply explain wraps: https://www.biggerpockets.com/member-blogs/15497/102003-wrap...