All Forum Posts by: Account Closed

y

Author

Seller financing is better - that's all you need to know!

QUESTIONS TO: Charles Parrish

Professional Auctioneer and wholesaler from Baltimore, MD

Q. Charles I think I have a great deal, the seller said he'd help with financing, but not sure how to make that proposal - you know I'd be in a better position if I didn't have to look for Hard Money Lenders or conventional financing - Can you give me some ideas?

Response: How are you going to structure your offer --? (contract engineering is needed as well as negotiating to meet intended goals and beyond).

Here are some way that I've used or offered over the years of investing to accomplish my control in the transaction:

• 1. Offer 100% principal mortgage, with X$ a month until paid (that is a mortgage without interest) ---- The interesting thing about this is that an investor can sell the property subject to the existing interest free fully assumable mortgage and charge an interest to their buyer or assignee on money that is owed. (Investors is paying $1,000 a month and receiving interest and principal payments for much more --– Understand this you can offer much more with a principal mortgage that is assumable. Who says we have to pay interest?
• 2. Use a subordination clause (allows you to refinance and place first seller mortgage in second position) this could benefit an investor – cash now from a new first mortgage without pay-off of first.
• 3. Early pay-off discount clause (if the mortgagee has an offer to sell the mortgage during mortgage life, you benefit from that discount) this could make the investors thousands of dollars more from the transaction.
• 4. One time fully assumable without qualification clause – gives the investor ease in which to leverage a buyer (who has paid a cash down payment) into a position of buyer of the property.
• 5. Stutter clause (Investors can skip one payment a year) isn't it amazing what an investor can ask for and usually get with a seller who is really anxious to sell?
• 6. plit notes – one mortgage and several notes secured by the mortgage – this gives seller/mortgagee, leverage to use those separate notes as down payment on other real estate or sell at a discount, use as collateral or given as cash flow gifts to family members.
• 7.Delayed payment clause - first payment to be within 6 months - gives investor time to do his thing to the property before having to make a payment.
• Same as above – but as investor and buyer arrange to partner with seller – using the notes to control real estate – seller wins big due to investors advance creative and aggressive method of buying real estate at a discount. (all terms must be in writing) Strange to think that the investor becomes a borrower with an equity interest in the mortgage that he owes on.
• 8. Offer rolling interest – no interest for 6 months – 2% for 6 months – 3.5 for 6 months ---- whatever you can think of to give you the financial leverage you need.
• 9. Substitution of Collateral – if you ever sell the property and you want more cash - DON’T pay off the mortgage – substitution of collateral clause in what will work. We call it walking the mortgage. So, if you have a property with a $100,000 seller financed mortgage and the contract of sale is for $200,000 – normally the mortgage would have to be paid off – unless you substitute it for another property with equal or greater value and equity – so you don’t pay off the mortgage and walk with $200,000 instead of $100,000. So now go out and leverage that $200,000 into more real estate – Pass go – collect $. Roll the dice again.
• right of first refusal – you want that discount – have it in writing that you have the right of first refusal – if seller has an offer to sell your mortgage, you have the first right to act on that offer. You benefit from that great discount (now is the time to go refinance).
• 10. Unsecured mortgage (use a note instead of a recorded mortgage) or secured by another property (a friend’s house, relative, your other properties) offer an interest or a fee to use their equity as security. This could give you a Free and Clear property or one with only a small balance (subject to existing mortgage).
• Release of Liability clauses if loan is ever assumed by your assignee (if they don't make the payment - you don't have to!

These are just a few of the different ways to control real estate with seller financing proposals.

When you can explain to a seller the benefits of seller financing – how to leverage that financing – what can be done with notes – how to partner with you, sell or use as collateral on other transactions or just sit back opening the monthly envelopes full of payments made out to you. (study the art of word pictures - many years ago I worked for the Dale Carnegie organization - they talked about the value of word pictures - how to put your prospect in that picture - showing him using and enjoying and benefiting from your proposal) Try it.

I like to show sellers that even if they are not getting the up-front cash they expected, the owner financed mortgage and payments they are receiving don’t have to be passive – once the seller has trust in your owner financing proposal - reaching your goals is possible - (ALWAYS PUT IT IN WRITING -don’t expect a verbal yes – melt everything down to writing and knowledge of answering seller’s objections – this is a crucial moment in your negotiations. – Take your time. Present it with enthusiasm and conviction – Let the seller know that this is your offer – they are getting close to what they want, but they have to give a little also to meet their selling goals)

How do you help sellers want to do business with you?

Sellers are always concerned about - can they trust you, will pay, what if the house gets damaged, how do I know I will get paid, what do I have to do in the event you don't pay me, do I foreclosures, will I lose my money?

Some ideas:

• Offer the seller an envelope with 12 post dated check - they don't have to wait for the letter carrier.
• Offer to put a deed in lieu of foreclosures in escrow with their lawyer - transferring property back to them in the event of non-payment or violation of the terms of the mortgage -
• Offer to have monthly inspections of the property by seller
• Let them know they will be added to your insurance policy in the event of fire - they get paid off
• Offer additional collateral (like a blanket mortgage) - always on a blanket mortgage you should have a release clause after the equity reaches a certain amount - no need to tie up your equity
• Provide additional co-signers
• Provide your nice guy resume (written testimonials about you from past customers, transactions, your preacher and other lenders, awards, newspaper clippings of you rescuing a cat from a tree, awards from the Boy Scouts) have all this in writing. Don't forget a great picture of you and your 11 children.
  
• Your professional status - Agent, Broker, Auctioneer, CPA, Neighborhood Organizer (it worked for the president) Church official, CCIM, Realtor, Notary, Mason - let-em know your accomplishments.

Seller assisted financing is the best loan you'll ever get - no points - no qualifying - no long application forms - no waiting for someone to say OK YOU' ARE APPROVED - or LOAN DENIED! - no disappointments - seller financing will increase your net equity in real estate more than anything in the world.

Charles Parrish, Broker, Auctioneer, Mentor and Coach for real estate Wholesaling

Who was your support while working through Trial and Terror learning to be an investor?

Trial and Terror was the answer I would give when asked,"How did you get started"?

For me it was the total support of my wife now for 50 years married, she supported my week-ends away taking seminars on different real estate subjects; creative financing, equity participation, options, notes, and assignments.  (And other courses promoted by gurus promising fast wealth! RIGHT?!).

At that time in my life, I didn't know what I didn't know! I really did not think about learning all that stuff to become an investor, I just wanted to make some money! (to pay for those courses, and my credit cards and to show my spouse that I could do it!)

After awhile I felt like I was being brained washed by these promoters of classes on"GETTING RICH IN REAL ESTATE"! I took so many courses, if they were presented in a college, I'd have a doctorate in real estate. But NO, most were were just for entertainment with a few nebulous hints of real money making techniques. I soon found out that many of those off the wall get rich in real estate programs ---- really did not work as promoted, so I had to take more, more to find the key to wealth in real estate! My support at age 20 was my wife.

How did you get started in real estate, who was your support?

Charlie, now 78 still learning!

Glad to help, call me anytime.

Charlie

Glad to help or give you some ideas, I have been investing with my family now for over 40 years, I own a real estate school and an auction company.

wishing you good luck.

You may find it valuable to study creative financing, options, assignments, Control and Roll methods of converting equity into cash, as a real estate auctioneer we complete many wholesale transactions.

Wishing you good luck -- Charlie

I always say DON'T TELL ON YOURSELF! Playing poker there are signals sent to other players called "TELLS".

Until you have control of a deal, don't talk, keep your cards close to yourself  and mute your comments.

It's nice to be friendly, but this doesn't help when you are trying to control a deal.

You need to find the owner of this estate, who is it assessed to, where are they, has it been listed in the past, is it in tax sale. Talk to other neighbors, what do they know about the house or the owner, where are they, look up address at IURealist for mortgage information, if necessary hire a detective to find the owner or decision maker!

Get yourself in the chain of title, offer to buy or take an option to buy the existing mortgage or other lien on the building.

Good luck only my opinion ---- Charlie

Relationships with agents? You are looking for an agent to refer off market properties?

Just my opinion as a broker investor for many years. Most agents are living from one settlement to another, loyalty is mostly to their commission split and to their already long established clients customers and to their spouse looking for a pay-check!

I think what you want is some inside off market deals with a ton of equity, agents with the ability to ascertain equity and owner motivation have a long list of folks who'll make offers to hijack a profit. Or, just grab it for themselves. 

You don't "find" relationships, you need to build them! That takes time.

Lets start with you! What do you bring to the relationship as an investor? You have cash? A credit line? what is your criteria to make an offer? Any of these; must have a ton of equity, seller needs to financing, got to be purchased below market value, must be approved by lenders appraisers or other gate keepers... your wife, your partner, your cpa or mother? How have you figured your profit potential (long term, immediate cash, assignment or JV, or hold and collect rent?

Agents don't want to nurse or education anyone, they are too busy trying to get listings and sell what they have. - THEY ARE  all about how much commission is in the deal, what's the split and how fast can we get to settlement!  

Your best agent is the one who represents you on a fiduciary basis, that is a BUYERS AGENT. You need an agreement with the Buyers Agent, pay a commission on unlisted properties, you should treat them with respect and be clear on what you want and where you went it, share with the agent the amount of cash you have on hand or can get with in 24 hours, and before you look at a property, look at the numbers first; what's the  liens, condition, how long on the market, comparable sales potential equity in the deal. Don't use your agent like a new toy, be ready to make serious offers.

One of the best ways to become market savvy is to look st 50 houses before making even one offer, keep a journal, price per SF, note comments from sellers and agents, copies of listings and all supporting information, do this and you will know the market as well or better than agents..... do this and the only relationship you'll need is with yourself and the market.

Cheers, just my opinion --- Charles

I have several blanket loans, one with SECU and Eastern Savings in Maryland. 

It is smart to negotiate releases clauses in your mortgage in the event you need to sell one of the buildings, otherwise the lender will take all of your proceeds. I don't care to obligate this much equity for a loan - but there are times when we investors need the money, I hate kissing up to lenders.

Charlie

good luck - make offers

IURealist.com

Are you n the information gathering phase of your real estate career?  Makes me wonder what is it you really want to know or help with.

Timing might be right, people need to live somewhere, why not at your house, the one you just creatively controlled and negotiated a giant discount on an IRR of 37%.

Baltimore is on the crap list now to many who listen to nay seers , but folks need housing, businesses need space, sellers need end results; Timing  may be right if you are smart enough to see thru the crap that is going on and learn the secrets of creative financing negotiating skills, assignments and creative ways to insert yourself in the chain of title. Baltimore will come back and will create entrenchments who will suck money and equity out of the proposed hard times! 

Sellers of houses and commercial buildings could now be motivated, may be willing to take time to discuss their property and potential solutions to DUMP the real estate and take their mask and clovers  off and drive to Florida. To hell will real estate! SHOW ME THE MONEY! They are thinking; I don't need housing inspectors, lead paint suits, tenant's right in rent court, politicians against landlords, water bills in excess, squatters or law suits!

Keep your ear to the ground, listen for the opportunities.

Real estate can be CONTROLLED without money if you're smart enough to apply simple controlling formulas.

(so hard for me to type with this mask on!

Charlie - my opinion only

help, trying to reach 2,000 votes, getting close.