All Forum Posts by: Page Huyette

It sounds as though you need to do more research on this property, really nail down your rehab costs and don't underestimate the time they will take. If the seller wants cash, they probably need....cash.

You're unlikely to get less than 6 points from a HML and will be lucky to get 15%. They won't finance it if you live in it either, way too much risk if you default. Doesn't sound like a good match for hard money to me.

A cash-out refi will cost you much more than a standard refi so you might want to take those costs into account as well. There's a discussion on refinancing private financing below which might shed some light on refiancing. One of the reasons its usually a 6-month minimum is due to the new appraisal, otherwise they'll go off the old one and you may not qualify.

http://www.biggerpockets.com/forums/49/topics/76479-refinance-of-private-loan

Lynn M. based on my research, it seems the best way is to run your payments through a third party servicer, as neutral proof of timely payments. Why rely on a private party when so much is at stake? Here are the ones I've found on BP (not an endorsement):

http://www.cashflowservicing.com/
http://www.plmweb.com/LoanServicing.htm
http://www.notecollection.com/
http://www.meracord.com/
http://allservicing.com/

What I did when setting up a buy-sell with seller financing--called my preferred Title Co. and asked who they refer, which was a local bank.

If you are dealing with an individual in a small community, or an older individual, it may give more peace of mind to them to use a local, bricks and mortar servicer. A lot of banks offer the service. It was a couple dollars more a month, but seemed to work better.

As a follow-up to this post, it really depends on your bank. I'm now working with a bank that only requires six months of mortgage payments, ideally paid to a third party servicer. This would qualify the private loan for a refi, not a cash-out.

Thanks guys. Hopefully this thread will shed some additional light on the subject for others in the future. Regarding the quote above, and realizing that originators and agents are two completely different animals, I had a thought.

We are negotiating through our agents, not with each other, so this should also offer a bit of protection I assume. I am not suggesting that the agent is responsible for any origination tasks or prequalification or anything of the sort. But, by performing this transaction through agents, using an attorney for promissory note, Trust Indenture, escrow instructions and the reconveyance deed and using a 3rd party servicer to handle payments and escrow, those bases are covered.

I am performing due diligence from all angles to ensure this goes smoothly, if it goes that is :)

Thanks Bill Gulley, great info as always.

If the seller agrees to the terms, I have an attorney ready to draw up the Trust Indenture in coordination with the title company. It sounds as though are suggesting the seller needs to propose terms and not me (buyer).

This is a NOO property being purchased as an investment, with neither party having originated loans in this manner before.

Your point about the party dying is a good one--I'll check with my attorney to be sure that is handled in the paperwork he draws up.

Not seeing anything in my state's SAFE Act that makes this improper, but will check through the info again.

Just found this blog post on the topic. Doesn't completely answer my questions, but I'm getting there.

If the seller is carrying and not charging points (ie: directly profiting from the loan transaction itself) then it works. Since their profit comes from the sale of real estate and not the transaction, that excludes it?

I have retirement funds with Tiaa-cref and met with their advisor recently. I was told that I couldn't even remove the funds and take the penalty hit if I wanted to. Reason being, since the employer has contributed funds they are obligated to protect those funds.

My spouse has a 401k with no employer contributions and he is also not allowed to take the penalty and rollover or withdrawal.

I've done a lot of cut and pasting Edward Scissorhands-style of many posts on BP that address seller financing, but there are several differing opinions on the topic of whether or not it is necessary to use a mortgage broker who originates secondary market loans for a NOO transaction.

My question: If I have an attorney prepare the note of Trust Indenture to be recorded at the county courthouse, use a title company for the rest of the transaction, and use a third party servicer for payments and escrow, would
that satisfy SAFE act requirements? The buy/sell would also be handled by two real estate agents.

I ask because I'm drawing up an offer where the seller has indicated interest in financing, and while I don't want to complicate things (it may scare them, they are older and tired of the property) I do want to have all of my ducks in a row.

Wouldn't take that long, except we would be doing the work and have full-time jobs. As for a buy and hold, I was thinking more along the lines of one year max--do some rehab this summer, then finish up the rest early spring 2014 in time for spring selling season.

Update:

Hard money options for funding the purchase not working out.

I could use some more advice. After running our numbers, and, based on the time frame we'd want to get this property out on the market again (before winter) its looking tough one. Trying to follow the numbers and not get caught up in the fact that the market is hopping. Our inspection period ends in the next couple of days. I'm mulling over this idea:

Ask seller to revise buy/sell contract to include 15-18k earnest money, carry the note for 6-8? months at which time I can have the property reappraised and be eligible for a refinance, using the anticipated equity and rental income instead of cash. This scenario was given the thumbs up by my mortgage banker, and I'm still convinced this is a solid property.

Exit strategy would be to refinance and hold, continuing upgrades over time if rental market stays below 2% vacancy. Or do a lease/purchase with a solid party. Or sell if the market continues its climb.

Good idea? Too complicated? Even though the property likely has at least one back-up offer on it (not sure though) my thinking is that since we are already under contract, we could write a personal note through our agent proposing the amendments, which would still satisfy several of the attractive parts of the original offer: 5k over asking, fast close, release from property responsibilities. Seems like its not likely they'll bite, but I'm wondering if its worth everyone's time.