How To Real Estate Transaction - I could use some advice please.

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RayseM

RayseM

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WE are the sellers - We being, my sibs and I.

The BUYER - one of our current GOOD tenants. (He moved in after his Mother moved out.) There is another family in the building who would be very happy if they didn't need to move. The potential buyer would keep "his" tenants as they would help pay his mortgage.

He is and has been gainfully employed with a State job. 2 young teenagers who all "love" their home. Steady income doesn't mean he has savings. Like many of us his economic picture is merely stable in this otherwise unstable world.

He has expressed an interest in buying but ... see above.

VALUE - $ 225,000.00 +/- A nice big home with lots of yard (way more than most) in a great neighborhood. An upstairs 2 bedroom apartment and then the entire downstairs where we kids all grew up. My Mother is now in an assisted living facility and we need to set this place free.

Question - How can we front him the downpayment on his mortgage? We don't want to finance it for him but would expect to receive the $$s back at the closing. How would that get structured or worded so that everyone comes out alright.

His Mother would likely be able to help him start out too.

We are NOT trying to induce this guy into poverty but rather help him with an opportunity that he might otherwise need to walk away from. The steady rent from the upstairs apartment and those very happy tenants make this a winning situation for all parties. We come out ahead too as there will not be realtor fees - so we can cut him more slack than in the open market.

I just don't know how to put the deal together.

Thank you for any suggestions.
 
It is always dangerous when the buyer has no skin in the game. You could set it up as an option to buy for a certain period of time to get his finances together. There is a cost to the buyer for this(some down &higher monthly payment-with some going to the sale price), but it holds off a sale to another party and creates a situation where it costs the buyer to pull out.
Just one idea but whatever I did I would get a lawyer, if it is more complicated than a straight out sale and picking up your check.

warning to buyer. While options to buy are a legit tool, they need to be taken very seriously, planed for and plan executed for it not to be an expensive lesson. Time flies by and before they know it the bulk will be due.
 
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This is also your asset the buyer needs to have closing costs about 1.5% upfront as well. You can only help so much and don't want to do yourself a disservice. This is your asset and you gotta separate your want to help your buyer vs protecting yourself in this transaction. He's going to need periodic upkeep money to do Renos and repairs and of he doesn't have that maybe he's not ready to buy a home and not your buyer simple as that.
 
cchu518 said:
You don't. You ask him to get an FHA and he produces 3.5% down payment or roughly 8k
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Yes, that's is certainly a good option. Thanks for that reminder.

Rhinoknives1 said:
Why the hurry? He pays rent until he has the down & can arrange financing
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The housing market is booming right now. Reports are that we are in an unprecedented sellers market. C19 is driving families out of the cities. Maine is a big beneficiary. Admittedly this style house might not appeal to the demographics of birds flying out of the cities. PLUS we will soon need the money for the assisted living and would rather sell sooner than when we are in desperate need to sell.

Peter Hartwig said:
It is always dangerous when the buyer has no skin in the game. You could set it up as an option to buy for a certain period of time to get his finances together. There is a cost to the buyer for this(some down &higher monthly payment-with some going to the sale price), but it holds off a sale to another party and creates a situation where it costs the buyer to pull out.
Just one idea but whatever I did I would get a lawyer, if it is more complicated than a straight out sale and picking up your check. warning to buyer. While options to buy are a legit tool, they need to be taken very seriously, planed for and plan executed for it not to be an expensive lesson. Time flies by and before they know it the bulk will be due.
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We are not at all talking about an "option to buy". I have never seen that go well. Just thinking that we could front him a downpayment. Not a loan - as we would have it be payable upon closing. Surprising how difficult it can be for folks (well, not really surprising) to come up with a downpayment when all other factors are affordable. We are not "savers" in this country.

Thanks for the replies. I know I am asking for advice on an unusual and perhaps unwise tactic.
 
cchu518 said:
This is also your asset the buyer needs to have closing costs about 1.5% upfront as well. You can only help so much and don't want to do yourself a disservice. This is your asset and you gotta separate your want to help your buyer vs protecting yourself in this transaction. He's going to need periodic upkeep money to do Renos and repairs and of he doesn't have that maybe he's not ready to buy a home and not your buyer simple as that.
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YUP to all you say - good points. We don't really know his status. Just anticipating. The fact that the rental of the apartment would provide very steady income is a motivating factor. Has been a rental for 60 +years - never empty for more than a few months. The house has been well maintained by my Mother and my brother & I. It needs some serious updating but minimal repairs - that we are aware of. I am a professional builder and my brother is a skillful plumber and electrician. The tenants have no issues that we have not addressed.
 
Not exactly sure what you were thinking
Is this the down payment to create a sales contract. If so you can wave that if you want. It is negotiable.
If it is the down payment required by the loaner. That shouldn't be do until the closing

But as previously posted-He just may not be ready for this purchase
 
A down payment required by the loan. Obviously real estate transactions and mortgages are not in my data base ;) As I wrote - we do not intend to set him up for a financial collapse just trying to be willing to help him with the possibility of home ownership. We don't really know what his financial preparedness is and so maybe getting too far along with my questions, without discussing with him first. More as it happens. Thanks.
 
Lenders usually want to know how the buyer acquired the down payment. I would find out if this type of arrangement you are contemplating qualifies.

If not, moot.
 
RayseM said:
A down payment required by the loan. Obviously real estate transactions and mortgages are not in my data base ;) As I wrote - we do not intend to set him up for a financial collapse just trying to be willing to help him with the possibility of home ownership. We don't really know what his financial preparedness is and so maybe getting too far along with my questions, without discussing with him first. More as it happens. Thanks.
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If you plan to be paid in full at the closing. The buyer is still going to have to acquire the money for the down payment or the lender to finance 100%-which They likely don't want to do that . It could be different in your area, but I have always brought my down payment check to the closing. The title company takes that and the lenders makes all needed adjustments then distributes checks to those on the receiving end. I haven't had to produce the down payment up front, but that could be affected by credit ratings and assets . If it looks like your just making it they may use more scrutiny.

at least you can use it to market the property if someone is looking for an investment-there is a good tenant

Regardless best of luck on the sale
 
In agreement with annr annr lenders will investigate the buyer’s financials if he is a first time buyer. A gift from a parent for the down payment would not affect the eligibility.

One other bit of advice, if your family is selling the property for possible long term elder care, I would get advice from a professional elder law attorney in your state. It was the best money we spent.
 
Asking for real estate advice on BF is something I might do, but my wife would talk to a property manager/real estate pro and look at me a little funny when I told her I asked BF.
 
Very useful thread, thanks. I had the very same problem with my property. Thanks to you, OP, I have one question less now. Update: I've decided not to sell my property to the tenant. The poor guy lost his job due to Covid and he doesn't have money for buying it. And I need money fast. I asked my friends for help and one of them told me that I should use the help of this thepropertybuyingcompany.co.uk realtor. Now I'm waiting. My friends said that they will sell it as quickly as possible. And for good money. Wish me luck.
 
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We've had the discussion with the tenant. He is highly motivated. We offered no incentive whatsoever. He is in to it, understands that we will sell regardless, to him or to someone else. He would rather be the buyer than have to move away so is lining up his ducks. We shall see.

Thanks for the replies everyone.
 
Maybe the family he's going to rent to ( your other tenant) has some savings and could pay a bit of rent early? Or- just a thought- they could split it. Then everybody wins and the renters get to own something. Is it zoned as a duplex?
 
Monofletch said:
Could he possibly be a Veteran? Those loans are easy on the $$$ down.
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I don't know that but if he is a vet, I'm certain he knows enough to use that to his advantage - if he can.

MayHemAndHaw said:
Maybe the family he's going to rent to ( your other tenant) has some savings and could pay a bit of rent early? Or- just a thought- they could split it. Then everybody wins and the renters get to own something. Is it zoned as a duplex?
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That's an interesting idea, if perhaps a bit too complex. Not likely that the other tenants will pay in advance - these days in particular. Not zoned as a duplex. Might be worth considering later but for now we will let it play out. The other tenants don't strike me as being that adventurous. The status quo is comfortable.

Thanks for the added options.
 
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