Need basic info on commercial loan assumption

**fauxe** · 03-02-2010, 07:30 AM

I've had the good fortune of having a contact refer me to a buyer who is looking for a hotel in my area. The buyer wants to assume the existing loan. Being relatively new in real estate, I have not yet had the opportunity to work on an assumption, so I'm pretty clueless and I'm trying to get some input on how this sort of deal might work.

One of my biggest question areas is the issue of down payment. Specifically: 1. Is a down payment customary in an assumption? 2. If so, is the down payment the typical 20% or 30% that a lender would require for financing a hotel? 3. Does the seller customarily get any of that down payment? 4. If the seller does not get any of the down payment, what incentive does they seller have to allow a buyer to assume the note other than simply getting out of the loan?

Obviously, the buyer's options are severely limited if they have to find a seller who just wants to get out of their financial obligation. Whereas if there is a financial incentive for a prospective seller in the form of cash down, then the buyer can play a broader field.

Thanks in advance for your input! Also, if you can recommend any good books on commercial real estate financing, I would appreciate it!

Fauxe

**Jimbo M** · 04-13-2010, 10:15 AM

Originally Posted by fauxe

I've had the good fortune of having a contact refer me to a buyer who is looking for a hotel in my area. The buyer wants to assume the existing loan. Being relatively new in real estate, I have not yet had the opportunity to work on an assumption, so I'm pretty clueless and I'm trying to get some input on how this sort of deal might work.

One of my biggest question areas is the issue of down payment. Specifically: 1. Is a down payment customary in an assumption? 2. If so, is the down payment the typical 20% or 30% that a lender would require for financing a hotel? 3. Does the seller customarily get any of that down payment? 4. If the seller does not get any of the down payment, what incentive does they seller have to allow a buyer to assume the note other than simply getting out of the loan?

Obviously, the buyer's options are severely limited if they have to find a seller who just wants to get out of their financial obligation. Whereas if there is a financial incentive for a prospective seller in the form of cash down, then the buyer can play a broader field.

Thanks in advance for your input! Also, if you can recommend any good books on commercial real estate financing, I would appreciate it!

Fauxe

Ihave not had a successful loan assumption because they always want the new party to qualify therefor creating a new loan??