Another way to negotiate a “no down payment” deal is with a seller who has no capital. The property is worth $130,000 and this time the seller owes $100,000 and wants $100,000, so there is no equity above what he owes.
Assume the mortgage
In this scenario, you would essentially come up and offer to take over the existing mortgage. You would say, “Mr. Smith, I’ll take over your mortgage. I’ll make the payments in the future. You’ll give me the house and I’ll make the mortgage payments, but I won’t pay off the mortgage.”
Salespeople will do this all the time, again if they are properly motivated. If they are not motivated and are thinking of selling in six months, they are not going to consider these types of offers without capital. You have to get the right vendors.
You could take over that mortgage, have the house deeded to you, and then basically own the property and continue to make your mortgage payment. I wouldn’t assume the mortgage; you would only make the payments. The mortgage remains in the seller’s name.
Some things to keep in mind
At that time, a couple of things could happen in the future. You could eventually sell the property and pay off the mortgage. The mortgage company may find out that you have taken over through any mechanism and they will probably send you some threatening letters and play a little rough with you.
In the end, they probably won’t do much and there isn’t much they can do. They could foreclose on the house, but what bank right now wants to foreclose on a house that payments are being made? They already have so many foreclosures that they don’t know what to do. They will not foreclose on a home where payments are made.
That’s the third way to create an offer on a house that has essentially no equity. You take care of the payments. Did you take some money out of your pocket? None. There is no down payment assuming the house is accurate and is worth $130,000 and you have built $30,000 of equity for yourself.
You didn’t have to go to a bank and apply for a loan. You didn’t have to put your personal credit on the line. He didn’t have to wait two or three months for the mortgage company to close on his loan.
Again, these types of deals are not going to be in MLS. That’s why I really preach and teach that ultimately when you get more advanced in real estate, you have to go out and meet with sellers, interact with them and develop a relationship and make offers yourself. You can’t do it through real estate agents. You cannot do it through computer websites. All these things are not where the offers are.
