In this technique, the seller sells the property to the buyer and takes back a mortgage for the balance of the purchase price. Try to negotiate the wrap-around to equal the full purchase price with no down payment. The seller receives payments from the buyer and continues to make payments on the existing loan(s) on the property. This is referred to as a wrap-around as the new loan “wraps” the existing financing. The loans that are being wrapped are referred to as the underlying loans. This procedure might provide the seller with the privilege of reporting the profit as an installment sale to the IRS, which could reduce their tax liability. This can be an important selling point that could convince the seller to take the offer.
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