Financing in San Antonio>Question Details

Liz, Other/Just Looking in Russellville, KY

My brother sold his house Owner finance.The person who bought it had no credit history (Pd cash) has pd. faithfully.He now wants to go to the bank

Asked by Liz, Russellville, KY Mon Mar 29, 2010

& get the person who bought the home to go get a better loan from the bank. What/how does he go about doing this.

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You say your brother wants the buyer "to go get a better loan from the bank." What does he mean by a "better loan"? Your brother really wouldn't care whether the terms are more or less favorable; he'd get paid off in any case.

As the other answers suggest, unless there's something in writing, your brother can't force the purchaser to refinance. He can ask the purchaser to do so, but that's about it.

However, if your brother wants the buyer to refinance because your brother would like to be "cashed out"--would like to receive the remainder that's due him--there are other options. When your brother sold the property to the buyer, there was a note--basically a mortgage. A piece of paper specifying how much was owed and how it'd be paid off.

That note itself can be sold, though probably at a discount. For example, let's say that note was for $100,000 at 8% interest for 20 years. That means your brother would be receiving $838 a month, every month, for 20 years. And let's say your brother's held the note for 2 years. Now there are 18 years left and the principle is paid down to $95,991. If he sold the note for $74,032, that would produce a yield of 12% to the note buyer. If the note buyer wanted a 14% yield, your brother could sell the note for $65,965. Basically, the greater the return the investor wants, the more your brother would have to discount the note.

But that's a way for your brother to receive immediate cash for the debt.

Hope that helps.
1 vote Thank Flag Link Mon Mar 29, 2010
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
Hi Liz,
I don't have enough information to answer this question, however, if what I am understanding, you are saying two different things.
You say he sold his property on his own via owner finance and you also state that he got cash, which may mean he was not receiving payments, assuming that the buyer put a cash down payment and inturn your brother is carrying the paper (note) then this anwers really depends on how the note was written. If there is something in writing stating there is or is not a due on sale clause, or a ballon payment after a period of time, your brother's attorney would have put it in the deed of trust on your brothers behalf, which he would have gotten from the actual owner financing addendum. Some things are not automatic, the one who prepares the deed and deed of trust, would have it in the paper work,(deed of trust), original contract any directives from each of them, your brother to the buyer and would have already been agreed upon. Your brother should seek counsel through his real estate attorney. His attorney should be the one giving him this type of advice. We are not attorney's, so maybe determine who helped with the paper work and find out his legal recourse.
If there is indication that the buyer can do so with or without his permission, than again this will be reflected in his deed of trust. Your brother can inforce what he put into the contract. The buyer would probably needs to seek his own attorney so he/she can clarify what he can or can not do. He may ask them to refinance. This does not mean they have too.
Sincerely, geneva
0 votes Thank Flag Link Tue Mar 30, 2010
Doesn't appear that your brother has much to say about. If the buyer is paying as agreed he can haddly be made to get a "better loan"
Web Reference: http://RalphandTricia.com
0 votes Thank Flag Link Mon Mar 29, 2010
@Ted: Actually, I don't require any credit history. No credit is better than bad credit :)

My portfolio requirements is 50% LTV, no credit history is OK, VOE is OK.

Also, home needs to be in specific areas of NY and CA so I suppose I can't help you in texas :(


Cheers,



Lou Wu
Chinatrust Bank USA
0 votes Thank Flag Link Mon Mar 29, 2010
Liz,

It would be quite easy if it were all lined up within the purchase agreement contracts your brother and the buyer had agreed to. If it's not contractual, I'm not quite sure there's anything your brother could do to FORCE the buyer to obtain new financing.

This would certainly be a case where he would want to review his contract very carefully and see where he can enforce his decision.

Best of luck,

Josh
Web Reference: http://www.eXposedHomes.com
0 votes Thank Flag Link Mon Mar 29, 2010
The buyer goes to a local lender to talk about loans. Hopefully he has been doing something to build up his credit history, other than just paying your brother on time (which won't help one bit).
0 votes Thank Flag Link Mon Mar 29, 2010
Maureen Fran…, Real Estate Pro in Birmingham, MI
MVP'08
Contact
Tough situation if the person who bought the home cant qualify for a new loan.
0 votes Thank Flag Link Mon Mar 29, 2010
This situation is a great illustration of why Buyers and Sellers both need professional representation. A properly drawn contract and Seller note would have included provisions for a payoff at a definite term, like a 2 year balloon payment. If those were not included, the Seller is at the mercy of the Buyer, who now owns the home and can do whatever he likes as long as he pays on time.

Your brother will need to consult with a Board-certified Real Estate Attorney, who will examine the contracts and note, and give him his options. If there are no such provisions, he may be able to entice the Buyer to refinance by offering a reduced payoff amount or other incentives.

Good luck.

Doc
Web Reference: http://TellEllen.com
0 votes Thank Flag Link Mon Mar 29, 2010
Hopefully he has credit now because everyone is requiring some kind of credit history..
0 votes Thank Flag Link Mon Mar 29, 2010
Talk with the bank. But it depends on how he sold it originally. Is there a balloon payment clause or does it say the buyer must obtain financing within a specific time frame. Your brother might have to talk with the attorney who drew the owner carry paperwork.
Ralph
0 votes Thank Flag Link Mon Mar 29, 2010
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