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Real Estate
QUESTION: My husband and I sold a property a few years ago that we owned free and clear for 45 years. We paid practically nothing for this property when we bought it back then. The area around it had developed over the years and we sold at a hefty profit. The buyers offered to give us 25% down payment and wanted us to hold a mortgage for the remaining 75%. First, we said no, but the buyers insisted and offered to pay more for the property than we were originally asking. We did not want to hold a mortgage because we were afraid the buyers might not make the payments on time and we did not want the burden of chasing someone for our money. Our accountant told us we would be better off tax wise if we held a mortgage and said that since the buyers were giving us a large down payment, holding a mort- gage should be a safe investment. We reluctantly agreed and the buyers have made all their payments on time, but last month their payment was late. I found out that they had to go out of the country. Upon their return, they paid the regular payment plus a late fee and informed us that they were working on getting a loan to pay us off because there is a balloon payment due in a few months. We have enjoyed the monthly income and don’t want to be paid off. Is there anything we can do to prevent this?
ANSWER: Call your buyers and let them know that you are willing to extend the terms of the mortgage. Your buyers may be feeling pressured to refinance because of the balloon provision in the mort- gage. They may welcome your offer since they would not have to go through the expense and possible frustration of a refinance. Since you would be saving them money, you should be able to charge a fee for extending the terms. The original mortgage would have to be modified or extended or you may need to renegotiate it if they are getting better terms and rates elsewhere. In any case you should contact a real estate attorney or title company to assist in the docu- mentation required. The buyers should absorb any costs involved.
Orlando Lopez is a licensed real estate instructor and real estate broker in the State of Florida. The answers to questions are based on facts, research and experience of the writer. It is not intended to give legal or economic advice. Readers should seek the opinion of their attorney or CPA for their specific needs.
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