Pieces Fall Together in the Steamboat Springs Real Estate Market; Seller Financing Option using a Wrap.
Sunday, October 9, 2011
Colorado Group Realty brokers worked together to complete a “remarkable” and “extraordinary” deal involving multiple properties, owners and buyers at the end of September in the Steamboat real estate market. With one deal dependent on the other, four homes involving five homeowners were bought and sold in a three-day period at the end of September! It’s especially noteworthy given today’s real estate market and lending climate. From Steamboat Today
From price negotiations, home inspections, appraisals and financing, everything had to happen smoothly for the deals to close.
However, offers relying on a contingencies being met don’t always work out as smoothly as in the above transactions. As an example, an owner has an offer contingent on the buyer selling and closing their home in order to purchase, but it doesn’t work out as planned and the buyer doesn’t see an offer by the contingency deadline - is there another option? If the home buyer has some equity in their home and an acceptable down payment to cover the seller’s closing costs, the seller could consider owner-financing the real estate purchase without paying off their existing mortgage using what is called a wrap-around mortgage, or “wrap” for short. When the home buyer eventually sells, they pay the seller, effectively allowing a much longer time for the buyer to sell their home. The seller takes enough down to cover closing costs and cover any risk of the buyer walking while the buyer makes payments to the seller who in-turn pays the existing mortgage. Of course, terms all have to make sense to both parties. Also, there are legal matters to consider, summarized in this article. For example,
if the seller owes on an FHA-insured (post March 1, 1988) or a VA-insured (post December 15, 1989) note and deed of trust, wrapping either of those types of loans is considered improper - possibly even fraudulent - by HUD, and is not recommended.
Since I’m not a real estate lawyer, please see the above article for more ideas about this type of transaction. I’ll help you find the home and Oliver can help us with the details of the “wrap”. Call me or contact me for a list of homes where the seller is willing to finance or trade. Colorado Group Realty, Broker/Owner 970-846-8284