This family is happy because they were able to buy a home without jumping over the hurdle of getting a new mortgage. They assumed the seller’s already existing loan. Or they gave the seller a wrap-around deed of trust, with the seller to continue to make the payments on his existing loan. Or they entered into an unrecorded lease-option agreement for the purchase of their new home.
Either way, they got into a property sooner than they would have been able to otherwise. Maybe their credit was a little too low. Maybe they had a recent bankruptcy. Maybe they had a recent short sale. Maybe they had recent late mortgage or rent payments.
It is tough to get by these days. Life is backward. When you are old, you usually have more than enough money. When you are young and have kids and need the money the most there is not enough.
Or maybe they could have gotten a new mortgage but chose not to do so. Mortgages involve a lot of closing costs. Maybe they were able to get a better rate or lower payment by buying using seller financing.
Creative financing is usually synonymous with seller financing, although creative financing is a broader term.
Seller financing has been around for a very long time. Read about the recent history of creative financing or seller financing here.
Seller-financing is advantageous because it avoids the hassle of having the buyer get a new loan. There are only two parties to a seller-financed deal, buyer and seller, instead of the usual three parties. The lender is not there to rain on the parade. Two is company and three is a crowd – in love and in real estate transactions.
Are you are a seller having trouble selling your property? I can guarantee you that a big part of the problem is that buyers in general are having a hard time getting financing. This is reducing your number of potential buyers. Or maybe your property needs work and does not appraise for enough? If so, then why not eliminate the obstacle? Why not sell utilizing a lease-option or a wrap-around deed of trust or an assumption – with or without lender approval? I am good at getting lender approval. Why make the buyer go get a new loan? Let the buyer use your loan.
In the old days almost all residential bank loans could be assumed or “wrapped around” or “taken subject to”. Then in 1986 Congress passed the Garn St. Germain Act. The due-on-sale clause in paragraph 17 or 18 of your deed of trust became enforceable under federal law. Before 1986 many states, including Washington and California, regarded due on sale clauses as “impediments to sale” or “restraints on alienation” and therefore void, at least as to residential properties.
Most real estate brokers are afraid to “go around” a due-on-sale clause. Most brokers tell buyers they have to get financing so the seller can pay off his or her loan. However, seller financing can work, although it has to be done carefully and with full disclosure to all parties. It helps if your broker is also an attorney.
I think one way out of our real estate recession would be for the enforceability of due-on-sale clauses to be suspended or greatly relaxed. Seventy percent of mortgages are owned by Fannie and Freddie, and they could suspend enforcement of Paragraph 18 of the standard deed of trust with the stroke of a pen. I wrote to the president about this. I wrote to the president of Fannie, the president of Freddie, the secretary of the treasury, the head of the FED. So far only Ben Bernanke responded. He like the idea but said it was outside his jurisdiction.
In a seller-financed deal the buyer makes monthly payments to a collection service. The collection service pays the lender in the seller’s name and keep a record of everything. The collection service might hold an executed deed or a full reconveyance. The buyer will pay a reasonable down payment, sometimes even enough to pay for closing costs and commissions and maybe enough to cash out the seller’s equity in the property.
If you are a frustrated buyer, especially one having trouble getting financing, look for a seller who will carry the balance. You might find one on your own, and if you do, contact me and I will write up the deal and get it into escrow.
On the other hand, you are more likely to find a willing seller if you work through a broker. Tell your broker to look for a seller who will carry the balance. When your broker finds a willing seller, tell your agent to call me. I will help him “land the airplane”.
Bear in mind that VA and FHA loans are assumable, provided that the buyer proves credit worthiness by customary credit standards, which may be less strict than standards for new loans. A possible reason for the reduced strictness is that the seller is not released from liability, which means the lender will have two parties “by the hind leg” and liable to pay the mortgage.
If you are a broker working on a deal, don’t be shy about calling. I spend a lot of time on the phone with brokers at no charge discussing these deals. After an initial discussion, I can often quote a flat fee. I love to work with brokers. They butter my bread. Sometimes I take all or part of my fee at closing.
By the way, I put on seller-financing seminars at real estate offices.
I sometimes take part of my fee when I am hired and part at closing. Clients like that.
Creative financing, seller-financing, wrap-around mortgages, lease-option deals – they work for residential property, second homes, rental houses, commercial property, building lots – you name it.
When a buyer and a seller find each other and want to buy and sell using creative financing, buyer or seller or broker should bring in a real estate lawyer to write up the deal and see that it gets closed properly and safely and to make sure that everyone gets full disclosure. These creative financing deals are complicated and it takes technical expertise to write them up. I have lost count of how many deals I have written or reviewed since I started doing real estate deals in 1978.
The selling broker and buyer broker normally write up deals for no extra charge. Brokers are authorized to write purchase agreement if standard forms will cover all the issues. But with seller-financing, there are no standard forms. Each deal is different. A lot of issues have to be addressed. Brokers have earned their commission when they bring buyer and seller to the point where they have reached a basic oral agreement. It is not the Broker’s duty to write up a complex deal. It is my job to add the technical details, identify all the issues and address them, and get the deed, note, deed of trust, lease-option agreement, collection account agreement, and other documents drafted. All the escrow closer has to do then is sign up the parties and handle the money.
There are several ways I can be involved. The buyer or seller can hire me and pay me a fee to draft creative financing documents. Or I can work as co-listing or co-selling broker. I can do that because I am also a licensed real estate broker. This may not necessarily cost the broker anything. The seller might agree to raise the commission enough to cover my fee, and I can take all or part of my fee at closing, which makes things more convenient for everyone. No one likes to pay attorneys by the hour, nor do I enjoy keeping track of my time by the hour and sending out bills.
Whether I work as listing or selling broker or as listing co-broker or selling co-broker, I am representing my client both as attorney and real estate broker. The party which hires me is getting a real estate co-broker and a real estate lawyer for one fee.
My role is to craft a transaction that will close and which will keep everyone out of legal hot water. My role is to prepare all documents for the escrow agent and see to it that the transaction gets closed. When there is another attorney involved, it is my role to work with that attorney to find a workable strategy and explain to him or her why I believe a creative financing transaction would be reasonable and safe. I make sure that the other party gets legal counsel if necessary.
I am only licensed to practice in Washington. If your property is in another state, and if you still want to hire me, you would also need to hire co-counsel in your state who will “sponsor” me.
James Robert Deal, Broker and Attorney
Broker with Agency One Realty LLC
WSBA # 8103, DOL # 39666
James at James Deal dot com
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- 35 Underwater Properties – Due to Climate Change
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CLICK HERE TOSIGN UP FOR A BETTER PROPERTY SEARCH TOOLYou will be asked for your email address and your telephone number.You do not have to enter your telephone number. You can enter any ten digit number if you want to retain your privacy. If you want me...
James Robert Deal co-brokers with other brokers on complex deals. This is a buyer broker co-broker agreement.
Eliminate traffic congestion. James Robert Deal managing broker. Become a real estate agent.
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Click here if you are having trouble viewing this message. Weekly Membership Newsletter JANUARY 8, 2019 • Stay Connected! QUESTION: I have been asked a few times about non-refundable earnest monies. If a seller, who is a builder, is requesting that earnest monies be...
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I am a real estate broker and a real estate attorney. I help buyers, sellers, and other brokers throughout Washington. Call me at 425-774-6611 when your purchase or sale involves legal issues. I can often quote a flat fee payable at closing.
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15605 Cascadian Way Bothell Washington. $430,000. 3 bedrooms, 2 bathrooms. Buy on FHA Rehab Loan. Hold long term. Eventually sewers may be extended 400 feet, and then two homes, two duplexes or five townhouses can be built. James Robert Deal, Attorney and Broker, 425-774-6611.
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18809 65th Place West Lynnwood WA 98036. This house has “good bones.” It needs fixup, cleanup, and your love.
As both a real estate attorney and a real estate broker, I co-broker with other brokers, helping them to take more listings and service them better. This provides better service for sellers.
Call a real estate attorney BEFORE you buy or sell property. Call Attorney James Robert Deal at 425-774-6611. In many cases I offer a flat fee, payable at closing out of escrow.
What is your Washington home worth? Click here to find out.
JRDeal NewZ JAMES ROBERT DEAL Political Activist - Real Estate Attorney - Real Estate Broker 425-774-6611 December 3, 2017 Read Online at: https://www.washingtonattorneybroker.com/jrdeal-newz-12-3-2017 DR. THOMPSON OF THE CDC ADMITS TRASHING DATA IN 2004, REVERSING...
Home prices in Seattle have doubled over the past five years.
Questions to ask before you buy a home.
Prince died without a will. Do not make the same mistake.
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There are seller financing restrictions when the buyer is going to live in the property.. No cash out less than five years. The rate must be fixed for the first five years.
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Most of our clients are people who tried to modify their loans on their own and failed. Mortgage modifications are tricky. There are procedures which must be followed. When you do something wrong, the servicer does not tell you what you are doing wrong. The servicer...
James Robert Deal, Attorney and Broker, assists for-sale-by-owner buyers and sellers. Call 425-774-6611 or 888-999-2022.
CFPB may allow consumers to sue banks and file class action cases. Banks will not be able to hide behind mandatory arbitration.