Outside the box...

Sullivan Multi closed a “bond for deed” deal last week. If you are not familiar with a bond for deed, as explained by John Graham, it is a mechanism whereby the title is held in escrow by the seller's attorney until payment in full is received from the buyer. The seller’s current mortgage(s) stay in place and the buyer pays the seller an agreed upon monthly payment and the seller then uses this money to pay the mortgage holder. The buyer is responsible for all management, upkeep, expenses, taxes and insurance, ect. The buyer owns the building but uses the seller’s current mortgage.

If the buyer does not pay, the seller can take the building back over in as little as forty five days. The risk for the seller is that the building could potentially be managed poorly or allowed to be run down.

The risk to the buyer is, while doing capitol improvements and paying the seller on time, the seller could potentially stop paying the mortgage. In that scenario, the bank could foreclose, leaving the buyer with no recourse.

As bad as everyone feels about the sluggish pace of the market lately, this climate seems to bring out the serious investor who knows an opportunity when they see one. As lenders pull their purse strings tighter and tighter, buyers and sellers will continue to find creative ways to transact property.