How a creative real estate solution helped a retired veteran, trapped by low equity, sell his property with zero out-of-pocket costs and purchase his dream home in a 55+ community
Location: Kuna, ID
Property Details: 2022 build, 4 bed / 2.5 bath, 1,850 sq ft home on a 7,500 sq ft lot
Loan: 3.875% VA loan
Solution: Purchased subject to using a lease purchase on a contract for deed
The Situation
The seller had no equity in his property and had listed it with another agent who knowingly overpriced the listing then let the property sit on the market with little to no contact with the seller. The seller was trying to sell the property in order to buy a new home in a 55+ community, but wouldn’t be able to purchase a new home if he had to come out of pocket to sell his current property. He also could not qualify for a new home if he didn’t sell his current home or have a solution to solve for his debt-to-income ratio (DTI).
The Solution: Subject To Financing
The seller was unhappy with the representation from original agent and the lack of solutions she provided him, so he canceled the listing agreement and reached out me for help. After discussing his particular circumstance we came to an agreement where I would purchase the property subject to the existing VA loan with a 3.875% rate, pay all of his closing costs, and give him $10k cash. We structured the transaction as a “lease purchase” where the temporary lease acted as a mechanism to cancel out the debt in the existing mortgage from his DTI in order to allow him to get loan approval on his new home purchase.
How The Seller Benefited
No Commission Fees: As part of the agreement, I did not charge the seller any real estate commission, which typically range from 5-6% of the sales price.
Covered All Closing Costs: I paid all of the sellers closing costs, which typically range from 1-2% of the sales price, so he didn’t have to pay anything out of pocket to complete the sale.
Structured as a Lease Purchase: This allowed the existing VA loan to be removed from the sellers DTI ratio and for the seller to be approved for a new VA loan on his purchase.
Cash Prior to Closing: I gave the seller $5,000 cash as a down payment prior to closing which he was able to use for the down payment on his new home purchase. It was considered cash from the sale of real estate and did not need seasoning. I gave him the remaining $5,000 at closing.
Represented Seller on Purchase: I represented the seller on the purchase of his new property and negotiated significant credits from the builder that reduced the purchase price and paid for closing costs on his new home.
The Outcome
In the end the seller was able to move out of his existing home and into the 55+ community that he wanted to and save a significant amount of money on real estate commissions and closing costs.