Seller Financing in Melrose, Bronx: Two-Family Homes by The Hub

Today's bank rate vs. a typical seller-finance rate

When a Melrose owner sells with financing, the owner becomes the lender. Most owners price that loan off what banks charge: homeowners typically ask about 2 percentage points more than the national average 30-year rate, with a 5-year balloon payment, or an extension if both sides agree to one in the contract. The numbers below update every week.

About Melrose

Melrose grew up around the meeting point of Third Avenue, Willis Avenue, Melrose Avenue and East 149th Street, known locally as The Hub. That intersection has been a shopping district since the days of the Third Avenue elevated train, with department stores, discount retailers and bank branches lining the avenue, and it is still the main commercial center for much of the South Bronx. North of The Hub the streets turn more residential, with apartment buildings, houses and churches running up toward East 161st Street and the edge of Morrisania.

Large parts of Melrose were rebuilt after the 1970s, when many older buildings were lost to fire and abandonment. The Melrose Commons urban renewal area, planned with heavy community input, filled former vacant land with two- and three-family houses, mid-rise apartment buildings and newer projects such as Via Verde on Brook Avenue. The result is a neighborhood where a house built in the 1990s can sit across the street from a tenement from the early 1900s. Metro-North's Melrose station on Park Avenue offers a short ride to Harlem-125th Street and Grand Central.

Getting around: 2 and 5 trains at 3 Av-149 St; Metro-North Harlem Line at Melrose station; 2, 4 and 5 at 149 St-Grand Concourse

What you will find for sale

• Two- and three-family attached houses built from the late 1980s through the 2000s under city homeownership programs, typically brick or masonry with small front and rear yards.
• Pre-war five- and six-story walk-up apartment buildings on the side streets off Third Avenue, Melrose Avenue and Courtlandt Avenue.
• Mixed-use buildings with storefronts below and apartments above along Third Avenue and East 149th Street near The Hub.
• A smaller number of older brick rowhouses, plus condominium units in newer mid-rise buildings, some sold through affordable homeownership programs with resale rules.

Why seller financing fits Melrose

Melrose buyers often run into lender trouble for reasons that have little to do with their ability to pay. Shop owners and vendors around The Hub may be paid largely in cash, and contractors and drivers often show uneven income from one year to the next, which makes standard income verification hard. Others have a short credit history or file taxes with an ITIN. On the property side, a three-family house with an extra apartment in the cellar, or a Third Avenue storefront building that a bank classifies as commercial, can stall an application even when the buyer is solid.

Many of the homes built under city programs in the 1990s are now owned free and clear by their original buyers, some of whom are ready to retire or relocate. Taking payments over time gives those owners an income stream and may spread out the tax on the sale. Owners of older walk-ups face a different problem: a building with long-term tenants and a few open violations has a narrow pool of financeable buyers, so carrying a note can widen the market for it and shorten the time it sits unsold.

The 5 terms you will negotiate

Every owner-financed deal comes down to five numbers. Here is what each one means, what is typical in New York City right now, and how they work on an illustrative 2-family house built in the 1990s in Melrose.

How to buy owner-to-owner in Melrose

1. Find owners open to financing. Start with Melrose properties on the SellerFinanceNYC live map, where every listing is checked against ACRIS deed and mortgage records. Owners who have held a building for decades with no open mortgage are the most likely to carry a note.
2. Offer on all five terms at once. Price, down payment, rate, amortization and balloon trade off against each other. Put them in a short written term sheet so nothing gets lost.
3. Hire a New York real estate attorney. Your attorney drafts or reviews the contract of sale, the promissory note and the mortgage, and confirms the seller has no existing loan with a due-on-sale clause. See our guide to finding an attorney.
4. Do local due diligence. In Melrose, check:
   • Homes built through HPD or partner homeownership programs may carry recorded deed restrictions, owner-occupancy requirements or subsidy recapture terms; have your attorney search the title for them.
   • Confirm the legal unit count on the certificate of occupancy, since some two-family houses have had cellar or basement apartments added without permits.
   • Walk-up buildings with six or more apartments built before 1974 generally contain rent-stabilized units, which limits rent increases and affects what the building is worth.
   • Properties along Park Avenue sit beside the open Metro-North rail cut, so visit at different times of day to judge train noise before you commit.
5. Close like a normal sale. The deed transfers to you, you sign the note, and the seller's mortgage is recorded with the City Register. Buy title insurance, and consider a loan servicing company to collect payments and escrow taxes and insurance.
6. Plan the balloon from day one. Use the five years to build a payment record, fix up the building and document income so you can refinance well before the balloon is due.

Questions buyers ask about Melrose