Buyer/seller “standoff” seems like a fallacy

[Anonymous]

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.

[Anonymous]

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.

[SDbear]

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.

[4plexowner]

Carrying a 2nd mortgage is very risky, IMO.

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.

[Author]

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