Yes that is a mouth full, and there are probably many reading this thinking a zero interest loan is not legal, by statute (correct) you win the prize, in this creative solution test. But, I recently put a deal together for my seller motivated to part with an unfinished condominium project. Here are the issues we faced: can't get conventional financing as the unit was just studded on the inside (exterior completed), Could have gotten a construction loan but they are harder to come by and require a bigger equity position than the buyer could manage (and he would then be required to have all the additional money to complete out of pocket). The buyer had some money and could do the labor himself, so we set about to make a deal work. The solution was to have 10% down (leaving the buyer with funds for materials) and recording a balloon note (payable all in arrears) at 8%, which is due in 6 months with the interest waived if payment is made at the 6 month demand note pay-off date. This will allow the buyer to complete the project (with NO monthly payments) and seek permanent financing prior to the 6 months and in all likelihood will have plenty of equity to pay off the note and take some cash out, and have a loan to value which will not require PMI.
Yes there was more to the deal we had to get permission from the association, a real estate attorney to write the mortgage and note, a letter from the fire chief, a town building permit,and builders liability insurance naming the seller as the loss payee (plus a few other items).
But the seller is comfortable with the deal , has enough money to proceed with a legal remedy if necessary, will have improvements made to the unit (if he has to own it again), I got paid, the association will get a finished property, the town will re-assess the completed condo, and buyer gets a below market value property and has the skills to make it a show place and in this case everybody wins.
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