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I have a house valued at $280,000 and wish to sell to my daughter and her fiance. He is a vet and has qualified for a $212,000 loan. He will sign note, and both will sign DOT and be on title. I would like to create a second for the difference. I realize he has qualified for monthly payments, etc. based on the $212,000 first, and I am willing to comply with whatever is needed for the second, including the requirement that it be assumable. I don't just want to sell [him] the house for $212,000, but I want to protect myself in the future. If the second is made after closing, it will not be a purchase money instrument and could become an unsecured debt if the first foreclosed. Is it possible to do a simultaneous first and second if the terms of my second don't require higher paments? For example, balloon, no payments for a period of time, etc. I do not intend to use any collection procedure if they were to walk away in the future, but I don't want to loose my money if something happens in the future.
VA has to approve the second. If he is only approved for $212,000 you will have to convince them that he can make payment on their loan and your future payments. This is a question for the VA underwriter.
If it were my daughter, I would sell the home for lower than the appraised value. You do not appear to be paying commission (+/-6%) or any selling concessions. I am not sure where your property is located, if it is not in a declining market then you are very lucky. If you are in a declining market, your appraisal is probably out dated.
I have carried a 2nd TD on a VA purchase during the last R/E market downturn (mid 90s).
The borrower got into trouble. They continued to pay on the 2nd and were not paying on the 1st TD. I found out about this and filed a NOD (notice of default.) The borrower then attempted to obtain a forebearance with VA and re-write the terms of the 1st TD which effectively eliminated my equity position. I was able to convince them to grant the property back to me, as they had no way of paying the re-worked mortgage and save his VA eligability for a later day. It worked out in the end, I got the house back, he moved into a rental.
By the way, If the 1st is foreclosed, your 2nd is unsecured unless you step up and take the 1st over.
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