UnThreaded | Threaded | Whole Thread (5) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127697  
Subject: Re: Land Sale Date: 5/20/2013 6:49 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
I have a vacation home that I am trying to sell in a still pretty depressed area. I have had several people interested, but they can't get bank financing. I am thinking of doing a "land sale" where I hold the deed and the mortgage, with a balloon in 2 years. I get a decent rate (8%) and a 10% down payment, if they blow the payments I get the house back and keep any money paid. If they can't get a loan after 2 years, my default rate goes to 12%.

Joan,

I took back a note when I sold a house about 15 years ago. We took 50% down and could have sold the land for more money than was left on the balance if they trashed the place. We had a 5 year balloon on the note.

Given that your issue is lack of availability of loans in general, you may need to increase your balloon time to longer than 2 years to give the local economy more time to recover. And what will you do if it does not? I would also try to get a bigger down payment on the property. What will you do if they trash the place? Will it still be worth the balance on the loan?

Also think about if you will handle escrows for taxes and insurance. Make sure they put you as the lien holder on the insurance, and that will allow you to receive notifications if they don't pay and tell you of any changes the new owners make to insurance. Since it's rural, I assume it's on a well, so no public water which is also lienable.

Have a lawyer draw up everything.

From a tax POV we simply held a private note, declared the interest earned and gave the buyer a summary of interest paid. We kept it an interest only loan, so that we didn't have to deal with amortization tables and inconsistent interest amounts. Keep it simple.

We faced a similar issue when trying to buy our cabin last year. No financing was available, and the seller finally had to accept a much reduced cash offer. There were insufficient comps for a Fannie Mae mortgage, and it being a vacation home we did not qualify for a USDA loan. Those who can afford to hold on to their properties are doing so, while those who must sell are selling at a huge discount, or having it foreclosed on. Seems to me that there is a perfect opportunity for private lending in these types of situations.

Good luck with the sale. If you decide to hold on to the place, consider putting it on the vacation rental market. You can get some idea of what your market is like on Homeaway.com.

IP
going to look at two more highly discounted vacation properties this week
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (5) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

Useful Resources
Our Home Center has all you need to make buying and owning a home a great experience. Get or refinance a mortgage and much more!
Buying/Selling a Home FAQ

Mortgage Professor
Offsite resource for mortgage questions.
Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Post of the Day:
Berkshire Hathaway

IBM: Is Buffett Wrong, or Brilliant?
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement