Seller Financed Loan? House Swap? Creative Real Estate transaction ideas needed.?

Question

Here are the details:

We live in the SF East Bay area. We bought our home in 2003 for $442,000 and--after some work done we owe $500,000. Yesterday I took my daughter to daycare in a neighborhood that I'd love to live in and saw a friend in that hood outside of his house. We got to talking and we both expressed interest in selling our homes. Our house would probably work for him because he can stumble home from the local bars. His house is in a good family-oriented neighborhood. I told him we wanted to downgrade--that we probably couldn't afford his house and he said "we can work something out." I zillowed our house and it's worth about $600,000. His is $530,000. He bought it in 2001 for around $50,000. It would be cool to avoid transaction fees and the like and I need to ask him if he's interested in our house. He invited us over for a NY party during the day and I want to have a few tricks up my sleeve when we attend. What would you do?

Thanks!

Oh--- I just remembered---he has a space downtown where people perform and there was an option to live there. I am thinking that it's super cheap for him and he wants to move there. So what do you think about this? He sells us his home for $530,000. We sell ours for about $650,000--minus the $25,000 it will take to ready it and real estate transaction fees say we clear $75,000 -$100,000----which we offer a portion of as a down payment. He then finances the sale (because he owes only $50,000 if that) and has a steady income for his remaining days. How would this work on paper?

Thanks everyone who has responded so far. I thought that the rate you would agree to would be more than say--you'd get from a CD or a money market account and less than the bankrate? Can someone please clarify that question?

Answer 1

A swap would not work, because your mortgage has to get paid off when you sell your house. He can however carry the note on his, assuming you can give enough down for him to pay off his existing note.

On a seller carry note (a TRUE seller carry, not a wrap), the seller is the "mortgage company" and you make payments to him. He has a lien on the property until the loan is paid in full. The house belongs to the buyer as much as it would if you got a loan from a bank for it.

Do either get an attorney to draw it up for you, or a Realtor. Since buyer and seller already know what they want, a Realtor could do the whole thing for maybe 1% or 1 1/2%. If you were in the state of Texas, I'd do it for you.

Answer 2

The answer is yes, this does work.

Seller financing is not all that unusual. While I agree that for this transaction you probably don't need an agent (even though I am an agent), you will need the advise of an attorney. In my state the title company that closes the transaction will usually help with this, so you may not have to get your own outside attorney.

Generally speaking in seller finance deals we look for about 20% down, an intrest rate that is higher (maybe even much higher) than a bank rate, and an amortization period that both side can live with.

When selecting an amortization, it's not uncommon to amortize for 30 years, with the entire note becoming due in 5 years. I say that's not uncommon, but it's not the only way. If both sides are agreeable there's no reason why you couldn't finance for 30 or even 40 years. Again, the title company will help you with the amortization schedules.

Good Luck!

Answer 3

Even trade, its a difference of .25%? or somthin. Forget the math, you like his dwelling better than yours, he likes your dwelling better than his, its like swapping baseball cards.
Now the math, forget what you paid and what he paid, that is irrelevant. What is the Current Appraised Value. If yours is closer to the Fault line and his is about to be bought by Chinese for a gozzillion baseball cars, see?
Get the Current Appraised Value of each house from an Insurance Company. Its kinda free. Then if its a diff of .15%, trade even steven. or for the lesser of tghe appraised values, you wontg be taxed as much then.
Now you see where I am heading with the answer, TAXES! they will slay you, so be carefull about the deal done, dontg worry about how much you might make or lose, your gonna have to pay taxes either way. And so is he, yall might wanna talk to an Estate Attorney or a CPA and figure out the best route that is a no loss for both parties.

Answer 4

First: Get a lawyer. Not a real-estate agent. That's probably enough advice. For discussion: "Sell on Contract." It basically amounts to seller-financed. The buyer makes payments to you instead of to a bank. You (seller) owns the property until the debt is cleared.

Answer 5

If you like it and he likes your place, just trade it and have him kick in some extra cash to make it even for the both of you.

So what do you do about the mortgages? See if the bank would transfer the mortgage from your current residence to the next one and vice versa.

Answer 6

i would go...