Electronically Signing Owner Financing Contract Made Easy

E signature owner financing contract

okay let's move on to our second creative financing strategy which is the owner carry or seller carry now what we're looking for is a seller who owns a property free and clear who is willing to accept most of the purchase price in the form of financing that is you give a small amount or very little down and the seller takes a note as most of the purchase price and that note is collateralized or secured by a mortgage or deed of trust against the property so you would get titled to the property the seller would get some money a note and then collateral as a lien against the property ownership would be in your name or a name of a trust or an LLC that you set up and the seller would have a lien against the property if you don't pay on the note they can foreclose it under state law now typically when I make an offer to a seller who has a free and clear property and by the way you might be wondering you know who has a create clear property these days everybody's mortgaged up to their eyeballs and the reality is 31% of America is free and clear nearly 1/3 properties don't have mortgages against them by the way can you buy a list of properties that are free and clear from public record sources that you can mail to and propose an offer absolutely so if you come across a seller who's free and clear typically I like to make a 2 offers on such a property and what is going to be a lowball cash offer and the other one is going to be a terms offer now typically the cash offer depending on what work the property needs but typically is going to be in the range of 65 to 70 percent of ARV - repairs that takes to get it in that condition so that's going to be a fairly low offer the terms offer what I like to do is offer someone in the realm of 80 to 90 percent of ARV assuming it doesn't need any substantial work I mean if a little bit of carpet and paint is thing but easily substantial work we're going to subtract that off later and I offer them what I call the five five five plan I got that from presidential candidate Herman Cain I think he was $9.99 so I got that five five five now by the way this is between you and me five five five you don't say this to the seller five five five but what you offer is five percent down or a number that is reasonably close to five percent down no more than five percent interest and no less than a five-year balloon a balloon is a premature payoff of the load so for example we usually advertise this node over thirty years we could have a five-year balloon and say after five years whatever is remaining on the balance would be due at that point now when you buy anyone have any balloon but if the seller says well yeah I want a balloon and they want a two-year balloon then you can negotiate and say no I want a ten-year balloon and then arrive at no less than five of preferably seven anything less than a five-year balloon is a little too risky for you because then you have to sell or refinance the property when that balloon comes up five percent interest again I wouldn't start at five percent or less and I don't say five percent down to the cellar if it's a $200,000 property 10 grave is obviously five percent but that's too obvious because they can figure that out in their head what I would say is ninety two hundred dollars or $11,300 some some number that they can't do the math easily in their head and they say oh I'm getting X amount cash now the reason I made two offers is first of all psychologically if you offer just a terms offer the answer could be yes or no if you offer a or B it doesn't occur to a lot of people that there's a C option which is none of the above so they're going and your B a B a or b and in the order of things offer this one first this one second if you start with the lowball cash you might really tick them off because it's so low that they just don't want to deal with you in terms of a terms offer 80 to 90% of ARV so if they're asking already a fairly reasonable price and you can say hey listen I'll give you what you're asking if you give me my terms but if I have to pay cash it's going to be a lower number that's a good negotiating strategy but I like to offer a and B and typically if I really want this one the terms offer I'm going to make this one sting a little more maybe make off from sixty sixty two percent so it stings so much that they go back to this offer and it seems better by comparison okay but again remember offered terms first because it's a higher price even though it's not the terms they're looking for they're not going to be insulted as if you offer the cash lowball and they see that number and immediately you know blow up at you so you got to be careful about that and at these numbers and you gotta make sure that you have a back-end strategy so if you're going to rent the property or you could sell it on a lease with option like we talked about earlier instead of a sandwich just the back end part of it but make sure you have enough room there where you have a little bit of equity you have a small now that you have a preferably no balloon but in at least five years to work with a fixed-rate payment of no more than five percent and in today's rents and prices in the right price range this should work sufficiently fine for you even though you're paying eighty to ninety percent of the price you're getting with very little down a reasonable interest rate and preferably no balloon or long enough balloon period that it's not going to be a problem for you and again in terms of negotiating don't say five five five just offer numbers that say X and then negotiate from there but you don't want to do much more than five percent down five percent interest and certainly no less than a five-year balloon