I was reading a seller financing post here on ActiveRain by Larry Reven. It is titled "Don't be fooled by "We Pay Cash For Houses"!!!!" In his post, Mr. Reven warns sellers against real estate investors and instead to work with a good real estate agent.
The real estate investor serves a purpose. Yes, it can be an expensive way to sell your home. When I say "expensive" I mean the cost in lost equity or written down debt and dinged credit.
Yet the alternatives of possibly filing BK and a foreclosure action can be overwhelming. Sellers can simply want out and want out *yesterday!* Going the retail route takes time and patience which the seller may not have. Their solution? The real estate investor.
The "We Buy Houses For Cash" signs are nothing more than a way of getting someone to raise their hand. Often there are a couple options presented.
Option 1: The investor purchases the home outright but at a deep discount. The RE investor is in this to make money. If he/she is going to take on the risk and expense, then they must balance that against the reward.
If a seller doesn't like option #1 (outright discounted purchase) then they are likely to be offered option #2.
Option 2: This involves seller financing. The owner agrees to stay on the loan while the investor takes over the home.
Unfortunately, option #2 has been the focus of some investor/scammers. Terrible! Yet, when the deal is properly structured, there are many benefits for both parties involved.
Imagine the seller being able to move their property with someone taking over 100% of the property expenses - mortgage payments, taxes, insurance, maintenance and upkeep. That's great but it needs to go a step further. Structure the deal in such a way that neither party has to trust the other.
What this means is that the arrangement is locked down so securely neither party has to trust the other. It just hums along until completion or both parties deicde they don't want to do it any more.
Sound to good to be true? It can and has been done. In a future post I'll go into a bit more detail.
In the meantime, this method is great for the passive investor that wants to get into residential real estate but doesn't want all the headaches that can come with managing rentals. What if you could purchase a bank owned property retail and then put a tenant-buyer in for say 4 to 7 years without having to dirty your hands? Now you have an investment running on auto-pilot!
If you are located in Northern California and are interested in learning more, I welcome you to call me at 408-694-1400. Opportunities abound!
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