4 Ways to Structure a Deal on Terms and Maximize Home Value
There’s no singular path for everyone and without being braggadocios, we’re pretty straight-shooters.
Do you want to be fully cashed out in 18 months or are you willing to extend that out to 48 months if you can make more money on the deal? If you have a mortgage, do you want us to have it paid off with a balloon payment or is there a way for us to take over payments for you for the duration of that loan? If you could make even MORE money by kicking us out of the deal and being responsible for the Tenant Buyer we put in place for you, would you prefer to do that?
For all options, we are going to agree to a price, begin making payments and then give you a final balloon payment on or before the deadline. With every option, except the Assign-Back (AB) structure, we are guaranteeing a cash-out for you on or before the agreed upon date. In Assign-Back, you do it yourself.
Let’s dive in.
What is a Lease Purchase?
The lease agreement is the most basic and common approach. We agree upon a price today, take over any and all responsibilities, begin making monthly principal payments to you, and agree to a definitive date to sell your house.
On or before that end date that we agree upon, we cash you out. Nothing more than a delayed cash sale with monthly payments. You hold title without any of the responsibility (yes, this is a real thing), you get a great sale price on your house and you’re fully cashed out within 18-48 months (depending on what price you’d like for your home).
• BEST CANDIDATES: this is kind of the one-size-fits- all option. Great for those that just want to sell it and forget it, but still prefer to hold the deed until the balloon payment is made. There’s not really ANY transaction that’s not good for this one.
• WORST CANDIDATES: the person who wants more responsibility/risk in exchange for more money (Read “AO”).
• WHY IT’S GREAT FOR US: we still make money on these but the biggest reason we do these is because it’s the one that’s easiest for people to understand and just safe for those that don’t feel comfortable signing the deed over.
What is Owner Financing?
This one usually gives you the largest sale price and also the one we tend to make the most about of money on because you behave like a traditional bank. The big difference between Owner Financing and Lease/Purchase is that with an “OF,” we buy the property from you, officially take the title and the payout is typically longer (4-7 years, depending on what you’d prefer). You’ll have a recorded note and mortgage on the property just like the bank does.
• BEST CANDIDATES: Those that are comfortable being the Bank, in the truest sense of the word. We take the title and pay you on a monthly basis but if we default on our obligations, you would theoretically need to foreclose on us (awkward to bring this up, but it’s important you know all the facts here). The cool part is that if that were to ever happen, you’d keep all the money we’ve already paid you, get all our home upgrades for FREE and then just resell the house on the open market for full value again. It’s literally your contractual right, just like a bank.
• WORST CANDIDATES: those that need ALL their money quicker or that aren’t as trusting as banks are (meaning you won’t sign a deed over to us, like bank does with you).
• WHY IT’S GREAT FOR US: We typically try and buy these ones for our own long term portfolio, so we make the most amount of money on these deals. We’ll pay you out in 3-7 years (you’re choice, of course), but we end up reaping for the rewards for decades to come.
How to Sell your house Subject-To?
If we can have your underlying mortgage go full- term, then we can potentially make a lot more money on the deal (not always) and you get to wipe your hands clean of the entire property immediately. So for TOPS, we buy your home and take title, but instead of paying off the mortgage in our financing term, we just take responsibility for your loan installments through the full term of your loan and pay the bank directly. As with all other options discussed so far, if our Tenant/Buyer doesn’t pay us or any other issue happens, it’s our problem, not yours.
Again, nothing absolves The Residential Buyer of our obligation to make all our payments on time. To further clarify that point, we actually even give you a document at closing that says that if we ever fail to meet our obligations, you can take this property back, keep all the payments we’ve already made, AS WELL AS all the improvements we’ve made on the home.
• BEST CANDIDATES: It’s good if you’re ready to wash your hands free of a property NOW as we never need to hunt you down to sign the deed over at the end of the term.. If you’re moving out of state or just not wanting the hassle, TOPS is an obvious solution, but it requires that you trust that we’re going to make your loan payments (just being honest here). You could theoretically make this a Lease/Purchase but we’re going to have to get you to still sign documents and stay attuned as things progress through the end of the term.
• WORST CANDIDATES: this one can be difficult for homeowners to take on if they don’t know us and are worried about us being responsible for their mortgage.
• WHY IT’S GREAT FOR US: we have no balloon payment on the underlying mortgage to make, so we will usually just keep the home for ourselves for our long-term portfolio. It’s also nice that we don’t have to hunt you down to sign the title at the end of the financing (we have legal remedies if you refused to sign after we’ve fulfilled the mortgage obligations but it can still be a pain in the butt to just track you down to sign).
Additionally, we have full control of the property, can put in place our own insurance, and we get to write off taxes, interest and depreciation as the owner of record. The biggest win for us is usually if you have a later-term mortgage (meaning that you’ve already paid a bunch of your interest obligation down) then we can profit more by handling the principal payments with your lender since this comes back to us if we decide to allow a tenant/ buyer to buy the home from us.
What is an Assign-Out Contract?
In an Assign-Out (we call an Assign-Back), we put together a Lease Purchase with one of our Tenant Buyers and then assign the contract over to you so it’s your responsibility, not ours. On this one, you’ll get money up front, make money on the spread and then in the balloon payment on the end. Though you can make more on this one, any problems down the road are yours to handle after we’ve completed the initial transaction. If the Tenant Buyer gets divorced, experiences a death in the family etc, then it’s your issue to deal with, instead of ours.. We make the LEAST amount of money on this one, but that’s fine with us since we are only putting in work in the beginning. This is truly the best move for some homeowners and we can talk more about whether you’re up for the role.
• BEST CANDIDATES: someone able to followup and progress on the credit enhancement program with the tenant buyer, intent to stay in town and ability to problem-solve if issues arise down the road.
• WORST CANDIDATES: moving out of state, someone who just wants to collect the check, not ready to problem solve if there is ever an issue with a tenant/buyer.
• WHY IT’S GREAT FOR US: we have zero responsibility. We set you up for success with the pre-screening report, mortgage-ready plan, equity enhancement program, credit enhancement program, a completed transaction and then move onto a new property deal.
We’re creative, and we’re committed to giving your an offer that puts the most amount of money in your pocket. Call us at (704) 859-8675 or fill out the form below and let us find out how we can work with you (and your co-heirs) to get the property taken care of.
We buy homes for top dollar fast in North Carolina and South Carolina.
We’re not here to sell you on anything; if your home fits into what we’re looking for, then we simply present you with a few options and then you decide which one meets your needs. We’re straight-shooters and suck at sales.
We’re finance-buffs who straddle the gap between investor returns and your own cashflow.