Getting Seller Financing from banks is AMAZING!
Last week, Kris Harris and I had another phone call with a bank. We are negotiating with this bank on an a cash flowing income property in Chicago.
We are working on making this a win-win deal for us AND the bank. After the recent phone call, I sent this letter to the bank:
- - - - - - - -
Dear [Banker],
Thanks for taking the time today to talk with us. I know that our offer is not perfectly in line with what the bank hopes to achieve in this situation. I really believe if the bank agrees to take the helicopter view of the problem, they will find that our offer meets the banks criteria for success in a lot of ways. I wanted to reiterate our position by stating the following things:
1. The bank wants skin in the game. We are putting skin in the game by paying for the owner's closing costs and by making 6 months of payments at the closing table. This isn't a traditional down payment, but it is skin in the game.
2. The bank wants a down payment. We aren't providing a down payment per se, but we are putting cash into the transaction. The down required by your bank in a traditional sense won't allow us to do the work on the property needed provide a good, clean and habitable building. Large down payments don't always guarantee monthly payments on the part of the borrower. I am sure your whole list of properties in arrears had 20% plus down payments.
3. The bank is in this situation because someone didn't make their payments. We can help the bank and fix this by making the first six payments at closing. Then every six months we will provide an additional six months of payments in advance of due date of those six payments in a lump sum. The bank will get the payments and the property will not be bad debt any longer.
4. The bank wants the building to perform. We are long-term qualified investors that have a great history of apartment buildings. The bank knows full well that this is a great building that cash flows. Especially if managed by experts. Kris will be local, unlike the current owner has been.
5. The bank wants an LTV position. We are aware that we are buying the building under market. The difference between the true value of the building and our purchase price from the seller provides the bank with an LTV for their loan. Your response that this LTV position wasn't earned by a down payment is valid, but the LTV position exists nonetheless.
6. This is a positive solution for all! The bank gets their monthly payments by the continued receipt of payments in advance, the bank avoids the foreclosure and further expenses, loss of tenants, holding costs, lower sales price later as an REO, Darryl gets to avoid the foreclosure and Kris and I get a cash flowing building that we can service and make a jewel of our portfolio.
We hope to hear from you soon!
Regards,
Mike Watson and Kris Harris
Comments(0)