<p>Yes, don’t have enough capital (HELOC or cash) for purchase and renovation costs and keep a reserve in order to feel safe</p>
<p>It will be VERY difficult to “wrap” now a days. Because the banks’ credit lines are tight and fed. is keeping a big eye on the banks. They have been burned before thus the tight policy. Besides, there is no way not to let the banks know what are you doing. Changes in ownership will be notified by the recorder’s office for sure.</p>
<p>Perhaps previous suggested idea " fixing for home owners to sell" is working on this deal.</p>
<p>Passed City final inspection today with no issues on the garage. Trying to get termite clearance tomorrow morning and then we can move to a quick close.</p>
<p>Regarding the ‘wrap’. I called my title company today to make sure I understand exactly what will happen. Title company says that wrapping the Seller’s mortgage was common in the 70s and 80s when a Seller had a good low interest rate loan and new loans were at very high interest rates. They are seeing them start to happen again and that it is very doable and they will easily handle it in the transaction. I still don’t know exactly how it works but I feel a little better about the possibility. </p>
<p>Made my offer verbally to Seller this morning and he didn’t just hang up the phone, he was receptive to my offer. He’s a shrewd guy so he is probably calling a bunch of other investors and seeing if they will beat my price. Oh well, I gave it a try.</p>
<p>You can search on google about wrap around loans, plenty of info.
The key is that lender has to consent on the arrangement and there is no title 17 in the loan docs ( due on sale). If you cannot get consent the seller can do a sell and lease back arrangement. </p>
<p>Lots of these creative financing was done in the 70’s, not too many is done today’s market because so many cash buyers. </p>
<p>In your case, you want low price and wrap around? I think the owner has to have his head being checked out.</p>
<p>Every mortgage I’ve had in the last 20 years (15? maybe more) has explicitly said it is not assumable, and that it is payable in full on a change of ownership.</p>
<p>
You could probably get away with this in the short term because it will take the mortgage holder a few months to catch up, or do anything about it, at which point you will have sold the property anyway. If I was the seller I wouldn’t want my name on a mortgage that someone else was responsible for paying, though.</p>
<p>“You could probably get away with this in the short term"</p>
<p>Not a chance. In CA, along side with a Deed of Trust, the bank will file a paper basically it says “notify me for any changes to the title of the property”, this paper is recorded in the recorder’s office and they will send a letter to the bank stating the changes. The bank will be notified within hours/days of any changes of the title and will call the loan if this happens. Or the seller must rescind the sale.</p>
<p>“Every mortgage I’ve had in the last 20 years (15? maybe more) has explicitly said it is not assumable, and that it is payable in full on a change of ownership.”</p>
<p>Wrap around loan is not assume a loan. In that, if the bank/lender agrees, the seller is continue be responsible for the payment of the mortgage, the buyer gets the title and sign a deed of trust with the seller, in effect, the seller holds a mortgage from the buyer(the amount could be any, based on the buyer’s down payment). So, if the buyer defaults, the seller is the one responsible to foreclose the loan, the bank will still get paid by the seller regardless what is the ultimate results from seller’s foreclosure process.</p>
<p>There are ONE major problem in this, the seller’s mortgage became an unsecured loan to the bank, so to get a consent from the bank is not easy, unless the bank gets security from seller’s other assets.</p>
<p>This kind of financing is very difficult in today’s market. Seller must have enough incentive to do that. If the price of the house is below the market to the extend that a flipper can make a profit from it, the seller is better off to sell it to a cash buyer and there are plenty of them around. Why the seller has to take a risk? That is why I said that the flipper market is over for me.</p>
<p>
You have too much faith in the system.</p>
<p>Maybe CA is different, but in MA virtually all loans are sold, sometimes multiple times, servicing of the loan get sold, sometimes multiple times. It can take months or years for the current owner of the mortgage to be recorded after all this, and sometimes it never is in a timely manner (which led to some very interesting foreclosure cases here).</p>
<p>When that loan is tranched up and bundled into CMOs or whatever and sold to different investors, often overseas, it can sometimes be nearly impossible to determine who the owner is. I think the likelihood of the loan getting called within days of a title transfer is wildly optimistic in most cases.</p>
<p>You are mixing the notification of loans and titles. Yes, the loan maybe sold, but title changes will be notified.</p>
<p>Besides, the escrow/title insurance cannot have a clear title if a deed of trust is recorded.</p>
<p>
Who exactly gets notified?</p>
<p>Whoever is the holder of the Deed of Trust will be notified if there is a change in Title.</p>
<p>I agree that the Seller would be nuts to let me make the payments on the loan and get title to the property. I haven’t gone much farther with it because I’m not sure we can agree on price. I believe that he would do all the paperwork and wrap the loan with his own Deed of Trust if I was willing to pay his asking price.</p>
<p>Regarding notification to the lender. In this case the Deed of Trust is to World Savings who has long since gone out of business. There are no other recordings, no recorded assignments to any other bank. So, if they were ‘notified’ it would go to some obsolete address and never get delivered to anyone that has anything to do with the loan. I can assume that this loan has been transferred many times since the demise of World Savings and it would take months months months (if ever) for the lender to ever know that there was a change in ownership.</p>
<p>The seller is paying down his mortgage, right? You may have to check with the recording office to see if the current holder of the mortgage had filed with their demand for notifications. When you buy a loan, you need to file that demand, thus notify the new loan service when a title has changed hand.</p>
<p>The seller will let you wrap the loan if the price is right:). So if your offer is 450K on a 600K asking price, he is really not going to go for it. The seller’s thinking is that “If I get the full market price without fixing, I will give the buyer who is short on cash the benefit of a wrap around loan.” And I know what are you(CB) thinking. 
We are on the same page.</p>
<p>In addition, Unless you want a quit claim deed without a title insurance, then you might slip by without let the lender know. Otherwise, how can you get a title insurance when there is a mortgage on the title? Escrow officer will never let it happen in a regular sale. </p>
<p>Well, in my case, we close a deal without even a title search, the bank gave me a quit claim deed. That brought out two problems when I was ready to sell, one, the violation lien on the deed was not cleared, two, the sewer ordinance was never satisfied. Had there be a second deed of trust on the title, I will not know at the closing either. For that, auction.com did disclose there is only one loan, they paid that much to search the title.</p>
<p>On this offer I am only $25k off his $500k asking price. I’m offering $475k but he is trying to cheapskate fix the house himself and thinks he can get $550k after that. But, he is dreaming if he is going to spend only $50k (my estimate $80k work needed) and sell to someone. He talked to me today and he is running around trying to find ways to not pull a permit and bring natural gas to the house… solar panels, weird electric heat pump/AC units, all kinds of strange stuff that will end up costing more in the end than pulling the gas lines. I think he finally realizes he cannot sell an All Electric house in Southern California - it’s been on the market for 4 months with him holding out on his price. That was about $8k in holding costs just sticking to his asking price.</p>
<p>My offer is based on the fact that I am pretty sure I can get $650k after it is fixed up really nice because it has 180 degree outstanding view that is not being optimized with the current living room/kitchen configuration.</p>
<p>Lots of company will do solar penal free if your electric bill is big enough. They will charge you a monthly cost which is constant for the house as long as the panels are working. Their monthly charge will be much less than the average electric bill.</p>
<p>I have managed to make a total mess of the Termite clearance on this transaction. First company came out and cleared the house completely and said there were termites in the new garage. Cost $550 to spray garage. I was livid because every piece of wood is new!! I wanted to call another company to get 2nd opinion but my agent advised it was a gamble. </p>
<p>I called another company and guess what??? He claimed termites in main house and garage was cleared. $1,000 to tent house. Uggh, what a mess!!! I know garage is clear but now I need to do the right thing and tent the house. Hope it doesn’t drag out the escrow because Mom desperately needs to pay next semester tuition.</p>
<p>We are clearing all the furniture and everything out of the house today. Getting ready for tenting on Tuesday morning. I’ve decided to do the final cleaning and window washing on the house before the tenting and everything needs to be cleared out to do that. Luckily the termite company will provide termite clearance report on the day the tent goes up. The Buyer should be able to fund their loan as soon as they have that piece of paper.</p>
<p>Original closing date was going to be January 14 but she wants to close on Friday January 10 - 4 days early.</p>
<p>The listing for the other house I am trying to buy just expired and it is no longer on the market. Seller called me up and gave me the details on the monthly payment if I wrap the existing $232,000 loan, which would be a huge benefit to me. It’s a 4.7% loan that is currently serviced by Wells Fargo, monthly payment $1,600. About half of it goes towards principal pay down.</p>
<p>He lowered his asking price to $495,000 - still too high for me. Unless I bypass my agent and try to sell the house myself which is very doable for this property. But, it might sever my relationship with my excellent agent and I’m not willing to do that just yet.</p>
<p>He told me something which I find absolutely crazy. He’s going to put it back on the market for an even higher asking price (current asking price is $515,000). His reasoning is that the market is so slow over the holidays and now the buying season will heat up. BUT, in the last week he has had a crew in there demolishing the kitchen and a stairway. No buyer that needs a bank loan can buy the place now without kitchen and appliances. His reasoning is flawed - the only buyers he can get now are cash investors. Cash investors do not take a holiday - they are working every day of the year and they are not ‘heating up’ after the holidays.</p>