Cross Collateralization: Zero Down

Good info: You'll need your cash to pay for repairs on the type of property where the owner will go for this:

Part of your offer is cross-collateralizing the property instead of offering a down payment. The biggest issue with zero down financing of a problem property is a fear that the monthly payments will not be made. Cross-collateralization is how you work around the seller’s fear.

You put up a small portion of equity in another property that you own. Let’s say you have an agreed to a sales price of $90,000 to be 100% seller financed. Instead of a down payment, you offer an additional $10,000 of security with the equity you have in another property. If you default on the seller financing, the seller receives $100,000 instead of $90,000.

In this type of arrangement, it’s important to include a clause in the contract revoking the cross-collateralization once the property appreciates in value above the above the cross-collateralized amount. You’ll find sellers willing to 100% finance your deals when you offer them 110% security in the deal.

Source: Cross Collateralization – A Zero Down Financing Method


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