CREATIVE CASH FLOW CONTRACT BUYERS CONTRACTS FOR A BUYERS MARKET CONTRACT ONE BETTY GETS A SELLER TO CARRY A LOAN WITH NO PAYMENTS Betty wants to buy some investment property. She has some cash for a down payment, but very little income and might not qualify for a loan. Fortunately, she is in a Buyers' market, so there are plenty of opportunities out there and she soon finds a large lot for sale. Because it is a Buyers market, she offers Frank, the Seller, a note, instead of cash for a deposit and $10,000 cash for a down payment on his full asking price of $110,000 and she wants Frank to carry a First loan for $100,000 for the balance of the purchase price, with no payments until it's all due and payable in ____________years including principal and interest of __________% per annum. Betty makes her offer contingent upon getting the zoning upgraded and being able to subdivide the property. If she can't do those two things, then she doesn't want the property and won't have to buy it. Since it is raw land, Betty doesn't need a pest control clearance and she don't need an inspection,, the way she would with a house, but she does want Frank to provide a Soil Engineer's report stating that the property is suitable for building on and a title insurance policy, guaranteeing that there are no legal problems with the title to the land and she wants Frank to pay all the closing costs. Betty also put a time limit to close escrow and complete the deal and, since it is a Buyers market, she adds a Buyers addendum with special clauses to benefit herself. BETTY'S ANSWERS TO THE BUYERS QUESTIONNAIRE Question One - Yes. (It is a Buyer's market. Properties are selling slowly, at or below the asking price) Question Three - Yes (There is a specific property in mind) Question Four - No. (The Seller is not forced to sell quickly) Question Five -Yes (It will be straight sale. It will not be an Option/Lease-Option, Equity Share, or Exchange) Question Six - Yes (The Seller is willing and able to carry all the financing) Question Eight - No. (It will not be a Land Contract sale) Question Nine - No. (There is not assumable financing available) Question Twenty Five - Yes (The Buyer is buying at least partially for investment purposes) Question Twenty Six - No. (The Buyer does not expect to get cash back at the close of escrow) Question Twenty Eight - Yes. (The Buyer does intend to subdivide the property) Question Twenty Nine - Yes (The Buyer does want to get the zoning changed) Question Thirty - Yes (This is a Raw Land sale) Question Thirty Two - No (The Seller is not willing and able to accept alternative collateral EXPECTED CLAUSES IN RESPONSE TO BETTY'S ANSWERS (10) 1.(Buyers Deposit) Buyer to give Seller a note for $_____ for the deposit upon the purchase price of $____________ 2.(Buyers Down Payment) Buyer to give Seller __________ with a value of $_______ as a down payment 3.(Buyers Owner Finance) Seller to carry a Straight Note in the amount of $_____, all due and payable in ______Years, including principal and simple interest of _____% per annum 4.(Buyers Investment) Contingent upon Buyer upgrading the zoning 5.(Buyers Investment) Contingent upon Buyer subdividing the property 6.(Buyers Investment) Buyer to have the right to advertise the property for sale or rent before close of escrow 7.(Buyers Raw Land) Seller to provide a satisfactory report from a licensed Structural/Soils Engineer before close of escrow 8.(Buyers Escrow and Closing Costs) Seller to provide a policy of title insurance and pay all closing costs 9.(Buyers Escrow and Closing Costs) Escrow to close within ____ days 10.Addendum For Buyers BENEFITS TO BUYER(S) BENEFITS TO SELLER(S) 1) No loan fees 1) Gets full price in Buyers market 2) No Payments 2) Collects Interest on His/Her Money 3) Upgrade zoning for increased profit 3) Lower taxes on interest earned 4) Subdivide for increased profit 4) Build a nest egg for retirement 5) Rent or sell before owning 6) Seller pays for engineer's report 7) Seller pays closing costs 8) Buyers Addendum BUYERS CONTRACTS FOR A BUYERS MARKET - CONTRACT TWO FRED GETS A LAND CONTRACT WITH NO PAYMENTS Fred wants to buy a house so he talks to Harriet, the Seller, about carrying a loan with a small down payment and no payments at all until the loan is all due and payable. Harriet agrees to this, but under one condition. She will not turn over title to the property. Instead, she will sell it on a five (5) year Land Contract (The laws on Land Contracts vary from state to state, but basically, it means that Fred has the right to occupy the property, sell it or refinance it, but Harriet will hold on to the title until he has paid a pre-specified amount of the loan balance) Fred makes his offer contingent upon his business partner's approval. Since it is a Buyers market, he offers a note, instead of cash, for the deposit and only $10,000 as a down payment. He also wants Harriet to pay for a complete inspection report and a pest control clearance and he wants a final inspection after the tenants have moved out. Plus, he wants certain items of personal property he saw in the house, such as the stove and refrigerator. Fred also wants Harriet to provide a title insurance policy and he wants Harriet to pay all the closing costs. Harriet has had tenant problems and is anxious to get rid of the house. She doesn't need the income for the next five years anyway, so she agrees. FRED'S ANSWERS TO THE BUYERS QUESTIONNAIRE Question One - Yes. (It is a Buyer's market. Properties are selling slowly, at or below the asking price) Question Three - Yes (There is a specific property in mind) Question Five -Yes (It will be straight sale. It will not be an Option/Lease-Option, Equity Share, or Exchange) Question Six - Yes (The Seller is willing and able to carry all the financing) Question Eight - Yes. (It will be a Land Contract sale) Question Nine - Yes (There is assumable financing available) Question Ten - No. (It will not be a Wraparound sale) Question Twenty Five - No (The Buyer is not buying at least partially for investment purposes) Question Twenty Six - No. (The Buyer does not expect to get cash back at the close of escrow) Question Twenty Seven - No... (The Buyer does not want a moratorium on payments) Question Thirty - No. (This will not be a Raw Land sale) Question Thirty Two -Yes (The Seller is willing and able to accept alternative collateral for his/her equity EXPECTED CLAUSES IN RESPONSE TO FRED'S ANSWERS (11) 1)(Buyers Deposit) Buyer to give Seller a note for $_____ for the deposit 2)(Buyers Down Payment) Buyer to give Seller __________ with a value of $_______ as a down payment 3)(Buyers Land Contract) Seller to carry a Land Contract of Sale in the amount of $____, all due and payable in ___Years, including principal and simple interest of __% per annum 4)(Buyers Inspection and Approval) Contingent upon the approval of Buyers Husband/Wife, Business Partner, etc. 5)(Buyers Inspection and Approval) Contingent upon Buyers approval of a complete inspection to be done at Sellers expense 6)(Buyers Inspection and Approval) Contingent upon Buyers approval of a final inspection report before close of escrow 7)(Buyers Inspection and Approval) Seller to provide a pest control clearance 8)(Buyers Personal Property) Personal property to be included in the sale ___ 9)(Buyers Escrow and Closing Costs) Seller to provide a policy of title insurance and pay all closing costs 10)(Buyers Escrow and Closing Costs) Escrow to close within ______days 11)Buyers Addendum BENEFITS TO BUYER BENEFITS TO SELLER 1) Low Down Payment 1) Quick Sale 2) No Payments 2) Retain Title to Property 3) Escape Clauses 3) Tax Advantages To Carrying Loan 4) Seller Pays for Complete Inspection 5) Seller pays for pest control clearance 6) Seller pays for title insurance and closing costs 7) Buyers Addendum BUYERS CONTRACTS FOR A BUYERS MARKET CONTRACT THREE SUSAN GETS THE SELLERS TO CARRY A WRAPAROUND Susan is a single woman buying a home on her own. She is in a Buyers' market, so she knows she can make demands on Gail, the Seller. She offers Gail, a note for a deposit and she offers a down payment of $10,000. Susan makes her offer contingent upon approval of her partner (even though she doesn't have one, this gives her an automatic "out" if she gets cold feet and changes her mind) She also wants a pest control clearance, certifying that there's no termites, beetles, dry rot or other structural problems and Susan wants a policy of title insurance guaranteeing free and clear title to the property, with no legal problems. Plus, Susan wants the stove and refrigerator and a few other things and she wants Gail to pay all the closing costs and to pay for a complete inspection (Plumbing, heating, roof, wiring, etc) and Susan wants the right to a final inspection before the close of escrow as one final chance to back out. Gail, the Seller, is retiring and moving out of the area as soon as she sells her home. She has an assumable loan at 5.5%, but it is for only $50,000 and she wants to sell the house for $120,000, so this leaves a $70,000 gap. Susan offers $10,000 down, if she will carry a First loan of $100,000 on a Wraparound or Over-riding, All-inclusive deed of trust (mortgage). Susan will make payments to an escrow company or neutral third party on this new loan, including interest of 8% per annum and the escrow company will keep making payments on the old, assumable loan of $50,000 at 5.5% and send Gail the difference. SUSAN'S ANSWERS TO THE BUYERS QUESTIONNAIRE Question One - Yes. (It is a Buyer's market. Properties are selling slowly, at or below the asking price) Question Three - Yes (There is a specific property in mind) Question Five -Yes (It will be a straight sale. It will not be an Option, Equity Share, or Exchange) Question Six - Yes (The Seller is willing and able to carry all the financing) Question Eight - No. (It will not be a Land Contract sale) Question Nine - Yes (There is assumable financing available) Question Ten - Yes. (It will be a Wraparound sale) Question Twenty Five - No (The Buyer is not buying at least partially for investment purposes) Question Twenty Six - No. (The Buyer does not expect to get cash back at the close of escrow) Question Twenty Seven - No... (The Buyer does not want a moratorium on payments) Question Thirty - No. (This will not be a Raw Land sale) Question Thirty Two - No. (The Seller is not willing to accept alternative collateral for his/her equity) EXPECTED CLAUSES IN RESPONSE TO SUSAN'S ANSWERS (11) 1)(Buyers Deposit) Buyer to give Seller a note for $____ on the price of $_____ 2)(Buyers Down Payment) Buyer to give Seller $______ as a down payment 3)(Buyers Wraparound) Seller to carry a Wraparound, or Over-riding, All-inclusive deed of trust (mortgage) in the amount of $____, with payments of $_____ a month, including principal and simple interest of _____% per annum, payable to ___________ Escrow/Title company, which will deduct $__________ per month as payments on Seller's underlying loan of $___________ and pass the balance on to Seller)) 4)(Buyers Inspection and Approval) Contingent upon the approval of Buyers Husband/Wife, Business Partner, etc. 5)(Buyers Inspection and Approval) Contingent upon Buyers approval of a complete inspection to be done at Sellers expense 6)(Buyers Inspection and Approval) Contingent upon Buyers approval of a final inspection report before close of escrow 7)(Buyers Inspection and Approval) Seller to provide a pest control clearance 8)(Buyers Personal Property) Personal property to be included in the sale ___ 9)(Buyers Escrow and Closing Costs) Seller to provide a policy of title insurance and pay all closing costs 10)(Buyers Escrow and Closing Costs) Escrow to close within _____ days 11)Buyers' Addendum BENEFITS TO BUYER BENEFITS TO SELLER 1) Low Down payment 1) Quick Sale 2) No loan fees 2) Retirement Income 3) "Escape" clauses 3) Profit on existing loan 4) Seller pays for pest control clearance 5) Seller pays for title insurance and closing costs 6) Buyers Addendum BACK TO BOOKS PAGE HOME PAGE |