What about sellers holding mortgages?
Jul 2nd 2008
Categories: Buying Real Estate, Real Estate News
hiI just read, today, that a small developer in New York is making mortgages for the buyers without appraisals, no points, no fees and a l point lower than the banks and amortizing on a 30 year basis but holding it only for seven years. They feel that by then, the real estate market should be stable and people will be able to refinance with an institution. This might be a good idea for some of our sellers. It would make the property more saleable and enable the buyer to avoid the pitfalls of the credit crunch and the seller can move on.
Everything boils down to ROI and Risk. Every day an innovative entrepreneur will open a hard equity warehouse mortgage business positioned to a specific opportunity trying to get a higher return than the 3.5% you could get on the best CD.
Question is, will you put $100,000 of your own savings on this portfolio to help this builder sell all units and supposedly recover your $100,000 in seven years obtaining a yearly interest on your investment of only 4% ( that is assuming that the spread would be 1% - traditionally is 2% )
Furthermore, I can guarantee that this builder will not lend its precious clients more than 60% of the value of the property and that interest rate is NOT a point lower than any institutional lender best rate.
Remember, most people will know the melody but few people really know all the lyrics.