Take Over Payments
Take over payments is an option for real estate investors to purchase property with little or no money down. Investors take over payments and assume the current mortgage without the need for a new one. Closing costs and other fess associated with buying a home are bypassed with the take over payments investing option.
Take over payments is a non-traditional way to get started in real estate investing or purchase real estate. Homes can be purchased for minimal upfront costs. Sellers offering their home for take over payments are oftentimes in foreclosure and about to lose their homes. In order to take over payments there may be outstanding delinquent payments due on the home.
For the seller, there are both advantages and disadvantages to take over payments real estate agreements. The seller can keep their home out of foreclosure using the take over payments option. However, the loan remains in the seller's name until the mortgage is paid in full. The seller is also at risk of the investor not making the monthly payments on the mortgage.
Take over payments is commonly referred to as "subject to." Most lenders do not approve of take over payments selling options and can revoke the loan if name changes are made to the title. However, if payments are made on time, lenders may overlook the take over payments agreement.
Unlike traditional real estate investing, take over payments agreements avoid the typical paperwork and fees associated with buying real estate. The buyer acquires the home for the balance due on the mortgage note without the added fees of realtor commissions, appraisals, and closing costs.
Time is also a benefit of buying a home though the take over payments option. There is no waiting on the bank to finalize the paperwork. Everything is negotiated between the buyer and seller. The agreement between the buyer and seller on take over payments can vary from transaction to transaction. Here is a common scenario of how take over payments work.
A seller wants to sell their home for $100,000 to break even with the amount due and cover closing costs. The investor offers to take over payments and after two years, the investor will then sell the property.
When the property is sold, the investor will pay off the remaining balance on the mortgage note, cover the seller's portion of closing costs, and give the remaining balance of the agreed upon asking price to the seller. Some investors will offer a bonus to the seller from the profit made selling the home. Although the seller received their full asking price for their home, the mortgage tied up their credit for two years until the property was sold.