PD: A listing longer than 60 days on market demonstrates that the seller had sufficient equity and/or net worth “to move on”. With the steady decline in price appreciation, an offer to have seller carry up to 20% of the selling price for up to 5 years at a favorable interest rate completes the sale without severe price cutting. Close of escrow overcomes an unanticipated “fear of lost equity” that the vacant/underperforming asset presently places upon the seller. OwnerMayCarry.com suggests a win/win/win for buyer/seller/realtor.
Sorry, Rich, that wasn’t directed at you. Your articles and analysis are great and exactly why I joined. 🙂 The user forum has taken on a personality of its own.
OwnerMayCarry.com suggests a win/win/win for buyer/seller/realtor.
How is this different from investing in a company that takes 2nd deeds, other than helping your buyer qualify for a loan? In fact the website's suggestion increases risk for the seller. In my opinion the seller would be better off reducing the price and investing the proceeds in a company that buys 2nd deeds. It reduces his risk by diversifying his exposure and increases his returns. Although this is not a good time to invest in such companies. It surely seems to be a win for the buyer and a BIG win for the realtor. It might be a good option for the seller in a rapidly declining market. In which case buyer qualification for a loan may not be an issue at all.
The buyer has very little incentive to make payments on the 2nd and there is very little recourse the seller can take against a non-performing 2nd.
The only real consequence to the buyer of not paying the 2nd mortgage is that his credit would probably get messed up.
As I understand it, the best legal remedy the seller could get would be a lien against the property. There would be no way to force a sale of the property or to garnish any of the buyer’s income.
The lien could remain in place forever. It would only have to be resolved during a sale or refi of the property.
So there the seller sits with a non-performing 2nd and a lien against a property that he no longer owns or controls.
That doesn’t quite sound like a win/win/win scenario to me even though the odds of it occurring might be low.
The only reason I would carry a 2nd is if the deal couldn’t happen otherwise. And then, after the 2nd had seasoned for six months I would sell the note at a discount. It makes more sense to discount the asking price of the property up front and find a buyer who doesn’t need an owner-carried 2nd.
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