What a Friday it was! It was like… I got bad news, followed by really good news. It all comes down to one thing: a second chance.
I gave my owner financing offer to the seller through Prius and the listing agent Condi. On Friday, Prius texted me this:
“I spoke with Condi and she told me that the seller has an equity mortgage on the property so the amount u r looking to pay up front will not cover that.”
According to Prius, an equity mortgage is when "the owner took out a mortgage on the equity he earned on the property. The mortgage has to be cleared before transfer of title by the seller." I have no idea what this means, but I'm going to ask Ross to explain how this affects the seller. (Once I get a good example-type definition, I'll post it here.) Either way, it meant that I would have to pay a higher down-payment and I wasn't happy at all. I asked her dumb ass what I would need to come up with as a down-payment to satisfy the bank’s profits, but she wasn't sure and said she’ll get back to me on that. Then Prius texted this:
“The owner said he will be willing to wait to close in April.”
This means I get a second chance to get a mortgage! Yes! This also means I still have a shot at retiring from paycheck work by the end of next year! Sweet! I love desperate sellers! I will admit, however, that it didn't feel like good news at first. I had gotten used to the idea of owning PPC #3 with no mortgage by next year, and it took me a while to realize just how great it is that I may not have to go that route anymore. Buying a property with all cash goes against my business philosophy of using the bank's money to buy properties faster. What's the point of buying a property with straight cash for $59,000 that can yield $2000 per month when I can use that $59,000 as a down-payment for a 200k property that can yield $3,000 per month or more?
This week is all about weighing my options. I’m waiting to hear back from Prius/Condi about how much I would have to put down should I still want to do the owner financing route. I also emailed Kirsten from CFB Mortgage and Petey from Empower. I’ll also email Ross and ask for his advice. I’ll put all the information in the next blog post and will be able to make a decision. This feels good. A second chance to retire when I'm 33 instead of 34. A year of my life returned to me. I really can't mess up this time...
P.S.: I just spoke with Prius. The owner bought the property outright a long time ago. Then he needed money for whatever, so he took out an equity mortgage on the property, which gave him some money in his pocket. So he owes the bank the money he borrowed, plus he wants to have some money left over for himself when the place gets sold. Example?
I have a property worth $50,000 that is mine, no mortgage or anything. One day, I decide that I wanna buy $30,000 worth of... I dunno, condoms. So I go to the bank and take out an equity mortgage (or a home equity loan) of $30,000 on the property so that I can buy condoms. Now, I want to sell the property. I still owe the bank the 30k and they have to be paid back. So I can sell it for $80,000 which would cover the value of the property plus the 30k that I owe the bank. In the current situation that I'm in, the seller borrowed enough money from the bank so that my offer of a $29,500 down-payment won't be enough to cover what he borrowed from the bank (and maybe some other debts he wants to pay off immediately). And that's that. Hmm... sometimes I miss being a teacher.
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