The recent credit crunch has brought back to life creative financing.  Though creative financing can be a good way to acquire property it has its own traps.  Investors and buyers should be careful about employing certain acquisition tactics.  Wraparound or "wraps" especially can be a risky proposition.  This is a financing method that should only be considered if the loan does not have a due on sale clause.  Since almost all loans if not all have a due on sale clause, the wrap around should  not be used.  The risk is that employing a wrap in fact trigger the due on sale clause putting the original owner and the new owner in a position of having to cure the loan immediately.  If a wrap is used the additional risk for the seller is ensuring that the new owner pays the loan.  Should the new owner fail to pay, the original dept holder will be responsible for the debt. Before considering a wrap please consult legal counsel.  The above statements should also be verified by a legal counsel.

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