pt.11 Understanding Creative Financing; All The Strategies

In this series we talk about understanding creative financing, the strategies used, and the pro’s and con’s of each. Here are the different strategies and how they pertain to the following …

 

Title Transfer 

Foreclosure

Taxes

Due on Sale Clause

Maintenance and Repairs, 

Closing and Transfer tax

 

1. Lease Options- No title transfer, so no closing or transfer tax, no foreclosure, only eviction. No Due on sale. Maintenance can be passed on to the tenant. Taxes are typically paid by the Landlord.
2. Contract For Deed/Land Contract- No title transfer, there is typically a closing but no transfer tax until the contract is fulfilled. No foreclosure just a Forfeiture process, which differs state to state. Taxes paid by Buyer, Buyer responsible for maintenance and repairs because this is a sale.
3. 1st position Trust Deed and Note- Only used when property is free and clear. Title does transfer, so there is a closing and transfer tax if applicable by state.  Foreclosure process. Taxes paid by Buyer, Buyer responsible for maintenance and repairs. No Due on Sale because the property was free and clear.
4. Seller Subordination- Title does transfer,so there is a closing and transfer tax if applicable by state. Foreclosure process, Taxes paid by Buyer, Buyer responsible for maintenance and repairs. No Due on Sale because the first mortgage should be paid off at closing. . 
5. All Inclusive Trust Deed/Wrap Around Mortgage- Title does transfer, so there is a closing and transfer tax if applicable by state. Foreclosure process, Taxes paid by Buyer, Buyer responsible for maintenance and repairs. There is a Due on Sale because there is an existing loan in place.
6. Subject-To- there is no recourse for the Seller to take back the property. Title does transfer, so there is a closing and transfer tax if applicable by state. Foreclosure process, Taxes paid by Buyer, Buyer responsible for maintenance and repairs.. There is a Due on Sale because of the existing loan in place.