No Money Down Home Buying

How does no money down home buying work? Made famous by Carlton Sheets in his no money down real estate infomercials the catch phrase “no money down real estate” has attracted millions to home buying on the promise that you can invest without money or credit. The good news… no money down home buying is real!

But as much as we hear about “no money down real estate” it seems that nobody is willing to tell you what no money down really means or how to actually buy with no down payment unless you invest in their real estate programs. Let me briefly explain how no money down home buying works.

The common misconception with no money down is the perception that the seller is not getting any cash when they sell the property. There are many ways to structure no down payment deals and most often the seller is getting cash, even if it is not provided directly by the buyer.

No Money Down Home Buying Example 1

For instance the buyer could have no down payment and the seller could receive their entire purchase price in cash. This commonly happens in a wholesale transaction where the buyer finds a property and is able to buy it at a substantial discount and fund the purchase with money from a private money or hard money lender. This type of no money down home buying is done all the time and is commonly called wholesaling or flipping.

No Money Down Home Buying Example 2

Another example of a no down payment deal can happen when an investor purchases a property “subject to” the existing financing. This means the investor is taking over existing financing without having to qualify for the loans (note: banks have a due on sale clause in their loan and have the right to call the loan due but in practice this is rarely done because banks are more interested in receiving timely payments than calling loans due).

A seller might have a property worth $200,000 and they owe $185,000. Realizing if they would have to pay money to sell the property after taking into consideration closing costs and a Realtors commission they decided to sell the property to an investor willing to take over the existing payments “subject to.” This is an example of no money down home buying.

No Money Down Home Buying Example 3

A seller owns a property free and clear and is willing to sell the property on owner terms. Most sellers are not interested in no money down deals if they are carrying all of the financing. However, if a property is in need of extensive repairs sellers understand the property will not qualify for convention financing and may be willing to carry all of the financing if an offer is properly presented.

One way to accomplish this goal is to offer a wholesale offer for cash or an owner terms offer for a higher amount where the seller finances the entire purchase price. In real estate all things are negotiable so there are many ways to create win win situations.

No money down home buying is real! A great book, "Real Estate Magic 101 - How To Get Rich In Real Estate Even If You Are Dead Broke!" goes into great detail on wholesaling, purchasing “subject to” and other investing techniques. A must read for investors of all levels.

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