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Commercial Property Simultaneous
Closing Special Program
Commercial simultaneous closings may be the answer to a challenging
loan situation. A simultaneous closing is a two-part process.
The first involves the seller of the property taking back an owner
financed private mortgage from the buyer of the property. The
second part involves Brinsaire Financial Group buying the mortgage from
the seller. This purchased from the seller at a discount.
This is similar to a commercial loan in some aspects and different in
others. As an example, different from a commercial loan, it
doesn't matter what the terms are on the owner financed mortgage. The
seller and buyer might have a 4% interest rate and we would
still be able to buy the mortgage. However we would not pay
as much for a mortgage with a 4% interest rate as we would for a
mortgage with a 10% interest rate.
Here are the main issues that must be there for a simultaneous close to
work:
1. You the Seller must be motivated. Motivated meaning there
should be urgency where you the seller would be willing to accept this type
of transaction, and the discounted
purchase. The signs of a motivated seller are:
- The property has been on the market for awhile
and still hasn't sold for some reason.
- Your in a hurry to sell.
- Heirs to the property original owner want to
sell the propert quickly.
- You are going through a divorce or
bankruptcy and need to sell quick.
2. We will need to know how much is owed on the property
3. We will need to know any possible problems UP FRONT. We
know there will be some issues and would rather know those
in the beginning than have them come up when we
are ready to close.
4. The buyer of the property must have at least 5% (10% is
preferred) for down payment.
5. The seller of the property should be willing to hold a second
mortgage if we are unable to buy the entire first mortgage.
Scenario's:
Let's say the property is an office warehouse. And it has
some deferred maintenance issues but there not major. The
seller hasn't
been able to sell the property and it's been on the market now for six
months. The seller owes $175.000 on the underlying mortgage.
There aren't any possible issues according to the seller. Now
a good credit buyer wants the property but there are some issues
keeping him from getting a traditional loan. Summary:
Example 1:
$600,000.00 Seller and Buyer agreed upon Sales Price
$120,000.00 Buyers Down Payment
$480,000.00 Owner Financed Private Mortgage given by the buyer to
seller (terms 20 year amortization, an interest rate 10% and
approximately
$4,700 monthly payment)
The seller takes back a $480,000 private mortgage and the transaction
closes between the seller and the buyer. We then step in
and buy this $480,000 mortgage from the seller for lets say $384,000.
Example 2:
$600,000.00 Seller and Buyer agreed upon Sales Price
$60,000.00 Buyers Down Payment
$450,000.00 Owner Financed Private Mortgage given by the buyer to
seller (terms 20 year amortization, an interest rate 10% and
approximately
$4,400 monthly payment)
$90,000.00 Owner Financed Private Mortgage given by
the buyer to seller (terms 20 year amortization, an interest rate 10%
and
approximately
$925 monthly payment)
In this example there is a first and second mortgage from the buyer at
closing. The seller keeps the second and sells the first to
Brinsaire Financial Group at closing. Will assume that we will buy this
mortgage for $374,000.
Shortly after closing the Seller's will receive $374,000 from the
purchase of the first mortgage. $60,000 from the down payment and
payments on the $90,000 Second mortgage for the next 20 years.
Check with a tax advisor for the capital gains tax benefits for holding
a second mortgage and deferring payments over time.
Example 3:
$600,000.00 Seller and Buyer agreed upon Sales Price
$30,000.00 Buyers Down Payment
$570,000.00 Owner Financed Private Mortgage given by the buyer
to (terms 20 year amortization, an interest rate 10% and
approximately $5,600 monthly payment)
In this example the seller doesn't want to sell the entire mortgage.
And doesn't want to hold a second mortgage. The
answer is
what's called a "Partial Purchase". The seller just sells a
certain number of payments instead of the entire mortgage.
Let's assume
we bought 120 of the 240 payments. Assume we are willing to
pay $336,000 for the first 120 payments.
At closing the seller will get the $30,000 Down Payment plus $336,000 for
the mortgage. After 10 years has passed we would assign the
mortgage back to the seller and the balance is still $415,000
Contact
Patrick @
269-357-1521
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