How To Buy Real Estate Investments With No Money Down
| | Friday, February 21, 2003 @ 05:00 AM EST
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Contributed by: Daniel Cobb
Daniel Cobb Properties
Read more archived articles about Buying
Buying property without putting any money down is really not as difficult or as complicated as it may seem once a person understands how and why the process works. Along with everything else in a real estate contract, the amount of the down payment (amount may not be negotiable if paying with certain types of loans) and who pays it is negotiable. The primary key to buying real estate with no money down is getting the seller to pay or give credit at closing for the buyer's down payment.
In order to find a seller that is willing to pay a buyer's down payment certain types of property or property sellers must be targeted. First, the buyer must look for property that has been on the market for a long time or is being advertised as a must sell. Secondly, the buyer must find property where the seller advertises him/herself as a motivated seller or the asking price has consistently went down (or back and forth) several times.
One might justifiably ask: why would a seller want to pay a buyer's down payment?
Let's examine Table A to find the answer:
Table A
Scenario # 1
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Scenario # 2
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Seller's asking price = $100,000
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Seller's asking price = $100,000
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Buyer's successful bid = $95,000
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Buyer's successful bid = $100,000
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Down payment for buyer by seller = $0.00
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Down payment for buyer by seller = $5,000
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Down payment by buyer = $5,000
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Down payment by buyer = $0.00
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Buyer's amount paid at closing = $90,000
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Buyer's amount paid at closing = $95,00
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Seller's amount received = $95,000
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Seller's amount received = $95,000
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As you can see from reviewing Table A, in reality there is no difference between a seller putting up a buyer's down payment then there is a seller accepting a cut in the asking price the property sells for. The harsh reality of real estate is
that the price a property is listed for is seldom the same price it is sold for. Once a seller begins to accept this fact, accompanied with having a need or desire of wanting to sell their property quickly, you have a formula for a seller which is likely to pay a buyer's down payment. Paying a buyer's down payment can be beneficial to both the seller as well as the buyer because in certain situations it allows the property owner to sell their property more quickly.
Just remember, there are several key factors to buying real estate with no money down. First, the buyer must find a seller who wants to sell their property immediately and targeting the certain types of property discussed earlier does this. Secondly, the buyer must give a bidding price that matches or is close to the seller's asking price, this is so that the seller feels he/she is not losing anything. Remember, that if the buyer targets the right types of property, it doesn't matter if the seller's asking price is accepted (or close to it) because that price is probably not what the property was original put on the market for anyone. In addition, that price is still minus whatever amount the seller agrees to put up or give credit for the buyer's down payment. Lastly, the buyer must be able to show that he/she is a qualified buyer; this is done by submitting bank statements to the seller showing that the cash is available to pay for the property or if getting a loan having a pre-approval letter from the buyer's lender. If the property is being purchased with a loan it is important for the buyer to ask the lender questions about having the seller putting up a down payment or credit. This is because some types of loans do not allow the seller to put up down payments or give credits at closing. Even if the loan allows this, there may be a limit on the amount permitted.
Note: Daniel Cobb has written the EBook Complete Guide To Investing In Real Estate Through Government Scavenger Sales.
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