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Seller financing?
Old 05-05-2012, 11:19 AM   #1
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Seller financing?

I came across a person which was a "real estate investor" in which he bought and sold notes, In a 10 minute conversation he explained, as best I can tell, that he helped people "underwater" sell house (using seller financing) where the buyer "leases"? the house for 1-7 years, then refinanaces house to buy it.

In the 7 years (or whatever period), the underwater house is owned by former owner, then sold when house is refinanced by the buyer.

Can anyone shed light on risks and rewards of this? For buyer, seller and middle man?
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Old 05-05-2012, 11:37 AM   #2
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So the seller keeps the "underwater" mortgage and "leases" the property to the buyer? Aside from the problem that many owner-occupied mortgages prohibit this kind of lease arrangement, what benefit is it to the buyer? Do they pay the market value of the house? Or some inflated price to make the seller's old mortgage payments come out even.

I don't see what is the role of the middle man. Just finding willing buyers and sellers? What does the middle man get paid.
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Old 05-05-2012, 12:26 PM   #3
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Its probably a lease option deal of some kind. You lease with the option of buying the house at a predetermined price and usually some of your lease payments get counted toward te purchase price. Since there is a vulture in the middle, I assume the buyer, seller, or both are taking it in the butt on the deal.
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Old 05-05-2012, 01:35 PM   #4
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This muddle sounds like your pal offers to pay off the mortgage of "underwater" homeowners, then lease their former home back to them. So people who can't afford their mortgage payments, can somehow afford the same amount (or more, since your pal has to make a profit on the deal?) in lease payments? Something's missing from this equation. It might have to do with the spread between the underwater mortgage rate and today's very low rates - but that sounds even fishier.

Now, I have heard of "seller financing" where you sell your home to a buyer and take back the note (you lend them the money to buy your house, and they make monthly payments to you). Supposedly, the seller cannot lose, since he can foreclose on his buyers, just as a bank would. But just think what a legal and administrative nuisance that is, even for the banks. And these homeowners sound pretty desperate anyway, or they would hang onto their "underwater" homes until the home's value goes back up.

Run away! Run away!

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Quote:
Originally Posted by jIMOh View Post
I came across a person which was a "real estate investor" in which he bought and sold notes, In a 10 minute conversation he explained, as best I can tell, that he helped people "underwater" sell house (using seller financing) where the buyer "leases"? the house for 1-7 years, then refinanaces house to buy it.

In the 7 years (or whatever period), the underwater house is owned by former owner, then sold when house is refinanced by the buyer.

Can anyone shed light on risks and rewards of this? For buyer, seller and middle man?
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Old 05-06-2012, 02:21 PM   #5
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So this guy finds a buyer who agrees to lease the house (at the current mortgage rate!?!) AND buy it sometime down the road (paying/financing what's left on the mortgage).

Can't imagine a buyer today agreeing to pay the old peak price. Too many REO's out there selling below construction costs.
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