Solutions


Methods that we can use to buy your house

Equity Type of Sale Brief Description Legal Document Benefits to the Seller Disadvantages to the Seller
If your house is worth more than you owe. Subject to If the seller has an existing mortgage (owes money to the Bank), then we keep that financing in place. The buyer makes payments to the seller. Those payments go into an Escrow account and are automatically distributed out to pay the existing Mortage, and the remainder goes to the seller.

1)Promissory Note and either:

2)a Land Contract or
2) a Trust Deed

1) Very easy to sell your house quickly. If the seller has trouble making the payments, this action can quickly save the seller from Foreclosure.

2) Usually no Realtor comission.

1) You do not want to be paying a higher interest rate to the Bank, than what the buyer is paying to you. Buyer should pay the same rate or higher.

2) Banks often insert "a Due upon Sale" clause into the mortgage document. This means the Bank can ask for the entire mortgage amount due all at once. The seller needs to make sure paperwork specifies that the buyer will purchase with all cash in the event that the Banks asks for all of their money.

If your house is worth more than you owe. Owner Financing Buyer pays the owner a down payment, and then makes monthly payments to the owner over the agreed upon time period. The Term could be 5, 10, 20, or 30 years, and could include a balloon payment at the end, or not.

1)Promissory Note and either:

2)a Land Contract or
2) a Trust Deed

1) If you have equity in your house (house is worth more than you owe), then the monthly payments + interest provide an income stream going into the future for the seller. It is analagous to having your money in the Bank earning interest. However, you can make 3% or 4% interest on you money, rather than 0.2% in today's Savings accounts. The total cash you recieve in the end is much more than if you had recieved all cash at the time if sale.

2) Usually no Realtor comission.

The seller needs to be sure that they want to recieve monthly Income, rather than all cash up front. You will receive monthly payments until the end of the agreed upon term of the agreement. But, if you need the money sooner for any reason, you cannot get it easily. This is similar to having the equity tied up in your own house.
If your house is worth more than you owe. Lease Option Buyer pays an Option Fee to the owner. This locks in an agreed upon sales price. From this point forward the Buyer has the Option to buy the house at the agreed upon price whenever they can come up with the money. Buyer occupies the house under a Lease agreement, until the time that the buyer decides to exercise their option to purchase. Term of the Option can be 1 to 5 years

1)an Option to Purchase and

2)a Lease (or rental agreement)

1) Cash up front in the form of an Option Fee. The seller will keep this money in either case. If the buyer does not come up with the money to purchase the house before the end of the Option agreement, then the Seller keeps the Option fee as compensation for holding the house off the Market.

2) During the period of the Lease agreement (before the buyer purchases), you are just renting your house. The owner still owns the house, and all Rental laws apply.

3) Usually no Realtor comissions.

1) As the owner, you have agreed to sell your house for a fixed price. If the value goes up significantly, that benefit goes to the buyer. There is the possibility that your buyer will not follow through, and you will get your house back.

2) If the buyer does buy the house, the Option Fee paid to the seller counts toward the sales price. In other words, the seller only recieves the total sales price. They do not recieve total sales price + an additional Option Fee above that.

If your house is worth more than you owe. Cash Purchase This is the most common method of purchase. The buyer either uses all cash, or gets a Mortgage from a Bank to pay the seller.

1)Promissory Note and

2)a Trust Deed

 The Seller receives most of their equity (difference between the value and what is owed) at the time of closing. Closing costs and Realtor Fees apply.

If the house was sold on the MLS, the Seller pays (usually 5%) of total purchase price to a Realtor. The sales comission is based on the sales price, Not on your equity.

For Example: If the sales price was $200K, and the seller owes $150K to the Bank, then your equity is $50K. The seller will pay 5% x $200K = $10K to the Realtor, and receive only $40K. The Seller just paid 20% of their equity to the Realtor !!
If your house is worth less than you owe. Short Sale If you owe more than your house is worth, a short sale might be an option for you.

1) Release of information

2) Hardship Letter

3) A package of Short sale documents for your bank.

1) Gives the homeowner the abiity to sell their house when they owe more than what the house is worth.

2) Debt relief

No disadvantages, except these two notes:

1) a Short sale is not available to everyone. The bank will not accept a Short Sale unless you have good reasons why you cannot pay off the debt you owe.

2) We will make sure that the bank gives you a statement saying they will not come after you later to recover the debt.

 

What is a Promisory Note ? What is a Trust Deed ? What is a Land Contract ?
A Prom Note is simply a Promise pay. The Prom note lists things such as:
- Total amount that is owed
- repayment terms (monthly, balloon, . . . .
- Interst Rate paid)		 The Trust deed specifies what will happen if you do not pay back the money in the Promsory Note. The house is security (or collateral) for the loan.

A Land Contract specifies that the Buyer will receive the Deed to the property only all money has been paid.

Does this specify what will happen if the buyer does not pay all money back ??

The house is security (or collateral) for the loan.