Distress Property? Here’s how to make a No Money Down Deal with seller financing:
You buy a property “Subject To The Existing Loan originally Taken Out by the Present Owner”. It is used when sellers have little to equity in a property. This is often referred to as “sub-to” and it simply means you are purchasing the property subject to the existing financing staying in place and in the seller’s name.
You are never assuming a loan or signing personally. Distress Property? In sub-to deals, the seller is often under financial pressure. He may need immediate debt relief by you taking over the loan payments and / or providing him with a small amount of cash to move out.
Here’s what we do when we explain a Subject To deal to a seller. We tell them:
If you were to enter into a deal with us, we would…
- Agree upon a purchase price
- If there is little to no equity, we agree to bring any default current and assume regular required payments on the balance of the current mortgage
From there, we close a deal on the property. The title transfers to us (Use a “contract of sale” in those jurisdictions where you can’t take title without triggering the loan’s due date)
The mortgage stays in seller’s name until we cash out the property in the future. During that time, we, i.e. you the buyer, have full responsibility for the property—You are contractually obligated to keep the mortgage current and maintain the property—which includes everything from repairs to maintenance, taxes, and insurance.
You “take possession,” Move in or rent out the property . You get the loan paid down as fast as you can. You hope & pray that the property will appreciate during this time. You can help it along by making cosmetic improvements- paint, yard work, etc. That gives us substantial equity in the property so we can sell it at a profit in the future. The new buyer will provide a down payment and get a new loan to retire the old mortgage.
You can structure a close date (and transfer of title with loan pay-off) contingent upon finding your buyer. It is up to you and how you negotiate the deal.