Home loan question.

[Bad2DBone]

I know I am a noob here and I don't even own a boat but I came here to look at some of the Olds powered jet boats and have decided to come by and check out the boats and also all the beautiful ladies you guys post.
So with that out of the way, it seem that there are a few of you here that are into real estate in one way or the other and I was wondering if I could get some help.
We just bought a new house and are in the process of trying to sell our old one. We have an intrested buyer but I guess in their proposal they want to do something called a "seller buy back".?
We got a call for our real estate gal tonight and she was saying the buyer is writing up the proposal and they are asking for us to carry part of the loan.
The house is 295K and they want to do a 15% buy back, which in my book is about 45K give or take. And pay us 6% intrest, and pay us off in 4 years or less.
To me it sounded like a good way to make some extra money, but, we have a good friend who works at WaMu doing home loans and she said this is a very big red flag. She said we would be #2 on the loan and if something goes wrong and they can't pay and the bank gets the house and sells it for what the borrower owes then we are out the extra cash they owe us. She also said if a bank wont lend them the full ammount then there must be a good reason so why would we give them a loan. Or that they must not qualify for the full price.
Has any one ever heard of this? Does it work? Is it a good way to get screwed out of alot of money?
thanks..

[bigd1]

I'm no expert but your friend sounds right. They can't afford it. I sold my house last year and had a couple of people trying this, or another angle is they've got 2 loans worked up to try to cover the note. The most likely oucome is that you'll waste your time with them and in the end the deal will fall through because they won't get the other loan they needed to get the deal done. My agent just laughed those offers off and we went with somebody who could actually close the deal and we both got something on closing date that we wanted: CASH.

[Mtg Pro]

I know I am a noob here and I don't even own a boat but I came here to look at some of the Olds powered jet boats and have decided to come by and check out the boats and also all the beautiful ladies you guys post.
So with that out of the way, it seem that there are a few of you here that are into real estate in one way or the other and I was wondering if I could get some help.
We just bought a new house and are in the process of trying to sell our old one. We have an intrested buyer but I guess in their proposal they want to do something called a "seller buy back".?
We got a call for our real estate gal tonight and she was saying the buyer is writing up the proposal and they are asking for us to carry part of the loan.
The house is 295K and they want to do a 15% buy back, which in my book is about 45K give or take. And pay us 6% intrest, and pay us off in 4 years or less.
To me it sounded like a good way to make some extra money, but, we have a good friend who works at WaMu doing home loans and she said this is a very big red flag. She said we would be #2 on the loan and if something goes wrong and they can't pay and the bank gets the house and sells it for what the borrower owes then we are out the extra cash they owe us. She also said if a bank wont lend them the full ammount then there must be a good reason so why would we give them a loan. Or that they must not qualify for the full price.
Has any one ever heard of this? Does it work? Is it a good way to get screwed out of alot of money?
thanks..
B2TB,
At one time seller carryback's were very popular. It is a fact that your lien will be in second position to the new first mtg. Your protection is that if the seller defaults on the first you can protect your interest in the property by bringing the first current. You do have the right as a lender to see if the buyer is qualified and can make both payments. Today we have so many 100% financing programs, including piggy backs, at a wide range of credit scores I would guess that income may be the issue. This would raise a series of questions on my part prior to lending the buyer the $44250. To answer your specific questions, yes I have heard of them. They can work if they are qualified. If you aren't careful and the market goes away from you, you can be at risk. If income isn't an issue have them look at a 80/20 or a 80/15/5.

[Bad2DBone]

Mtg Pro. Our agent said if it goes down the crapper we can always put a lein on the house to try and get our money but I'm not sure how that would work as the bank is first in line. And like you said, if income is the problem, how will they pay the payment and pay us as well. On our house we just bought we went with a 5 in 1 intrest only loan. It got our intrest down to 4.75% and then we just added an extra 1K to our payment and in 5 years we will have 60K in extra principal. All with out having to do a 30 year conventional with an intrest of 5.75%. Our friend said too , like you did, that we can ask for a credit history and proof of employment to se where they stand.
Our current home builder wouldn't let us make any changes to the house we bought if we went contingent so since our house didn't see before we bought we now have 2 mortgages and it would be nice to get cashed out, but if we could make a few buck on the intrest that would also be nice. Since we just moved in we haven't had to make both payments and while it wont be to big a stretch we just might have to eat mac and cheese more often then usual, but I'm sure the kids wont care. :)

[Mtg Pro]

If you do this you would put a lien on the property at closing. In fact have the seller sign your note and have it recorded at the same time as the new first. If you don't record a lien right away the seller could go out and get another loan and then you would be in the third position.

[Tequila-John]

If you do this you would put a lien on the property at closing. In fact have the seller sign your note and have it recorded at the same time as the new first. If you don't record a lien right away the seller could go out and get another loan and then you would be in the third position.
Great Advice

[Bad2DBone]

So it's not like this is a bad idea it's just that we need to cover our asses? We will get the proposal today so I hope it looks ok and we don't see to many red flags.
Thanks for the tips... :notam:

[Tequila-John]

So it's not like this is a bad idea it's just that we need to cover our asses? We will get the proposal today so I hope it looks ok and we don't see to many red flags.
Thanks for the tips... :notam:
Its not a bad idea. Like you said cover your asses. You can make some money in the mean time on interest.

[Bad2DBone]

Its not a bad idea. Like you said cover your asses. You can make some money in the mean time on interest.
It's all about the CYA. thanks again.

[NorCal Gameshow]

up the price to 335k and kick them the cash.. :idea:
really though, with all the lender programs out there i'd be concerned if they can't do it on there own...
if your gonna take a risk keep it and rent it out ;)

[Parker Dreamin]

I would do higher then 6% because they would not be able to get that at the Bank for a 2nd and being fixed...... Dont know all the details of the borrower but more like 8% or higher, plus they wont be paying you any closing cost or lender fees. So it is a win win for them.

[coolchange]

Is the market that slow up there that you have to intice buyers?

[Cole]

I would try and counter with at least 8%....80/20s are common place now and the 2nds are 8-12%...and thats with good credit!
find out why they can't qualify for 100% financing...find out everything about them and DEFINETLY put a lien on the place right away if you go with their offer!!! :)

[CustomCruiser]

I'm in the process of selling my house and buying new. After having my house on the market for only two weeks, I'm amazed at how many different "angles" prospective buyers have come up with on their proposals. I assume your prospective buyer could not qualify for the amount of financing required to buy your house, thus the "buy back" deal. This should raise red flags. If professional lenders will not give him/her the required funds, then there is a problem somewhere. Chances are somewhere down the road he/she will be late on one or more payments or will not be able to afford the to make payments at all.

[Bad2DBone]

We have been screwed out of money before and really didn't like the process so I'm not looking to have that happen again. The market is doing pretty well up here so I have no idea why they can't find financing or why there agaent would even show them a house that wasn't with in there borrowing price.
It's been on the market for about 3 weeks now so it's not like we are paniced just yet.

[Sleek-Jet]

Speaking from recent experiance, if they go with an 80/20 loan, get the appraisal first. You don't want to get to signing and then find out the finance company won't cover the whole nut.