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shawnhquick

Creative Strategy to Buy/Sell Jumbo Residential Property (over $7

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Creative Strategy to Buy/Sell Jumbo Residential Property (over $750K)

 

Getting a Jumbo loan from a traditional lending institution can be extremely difficult. This is a creative strategy for those who cannot or do not desire to use a traditional bank to finance the purchase a property over $500K.

 

My company purchases seller financed notes – and we can purchase those notes and mortgages literally at the closing table. This will only work for deals where the seller is willing to accept some amount below the true, appraised value because the seller financed note is bought at a discount, depending upon the payor’s credit, the down payment, the interest rate, etc. In our area, this isn’t a good option for the smaller deals because our market is so hot right now, if the buyer can’t get a traditional loan the seller can easily find another buyer in this market. BUT for the jumbo deals, and especially the super jumbo deals, this is a great tool to have. I always tell brokers and Realtors to always consider this strategy before lowering the price on a home. Instead, offer owner financing and then discount the note at closing. Everyone gets paid on the Sales Price (or the loan amount, in your case) as they normally would at the closing. It can be a win-win-win situation for all.

 

Obviously, if you can get the buyer a traditional loan, that is usually the way to go because the seller will receive the entire amount in cash and not need to take a discount – unless the traditional loan has origination points. If so, then this strategy may even be a less expensive alternative. Usually however, this strategy is aimed at deals that cannot get done traditionally for one reason or another (self-employment, small down payment, can’t prove income/assets, etc.). For those types of situations, this may help you get to the closing table.

 

For example, assume there is a beautiful estate for sale (we do these nationwide). The seller sets the sales price at $1.8 million, knowing that the homes in the neighborhood were selling for around $2 million and that his home was comparable. He offered owner financing and received numerous inquiries. One prospective buyer had good credit (700+) but only had $90K (5% of the price) in cash that she wanted to put down – AND she couldn’t prove her income. Most banks wanted her to come up with at least 20% in hard cash for this type of jumbo purchase. We could see from her credit report that she had a previous mortgage around a million dollars that she had been paying well on. She also showed us a trust account that had substantial cash so we felt comfortable. We set up a 2nd lien for $180,000 in order to get an 85% first lien. Both of those liens were set up as seller financed notes. We gave her an interest rate of 7% and put a 10-year balloon on it. We purchased the first lien from the seller at closing for 90% of the balance. So the seller received $1,377,000 for the first lien, plus $90,000 cash from the Buyer’s down payment, and the $180,000 2nd lien. This was great for this seller, because he was almost facing foreclosure. The buyer was happy because she got her dream home that she couldn’t have gotten otherwise. The Realtor was ecstatic because her commission was based on the 1.8 million sales price, and the mortgage broker who brought me the deal was happy because he still got his 1 point right on the HUD as a “due diligence” fee.

 

Sorry to be so lengthy. I just wanted to let you know about this alternative. Feel free to visit my website or contact me anytime to discuss strategies. www.yourezsale.com/quick

Or call me at 410-671-4569, to discuss further options.

 

Shawn Quick/Easy Private Mortgage

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