Answers (8)
- Pam Sitterly, "PamSitterly"
- Contributions:21
I love owner financing. In a tough market like this, it opens up the sale of your home to more prospective buyers. Usually, when you offer great terms, like owner finance, you can get top dollar.
I think the key here is to collect a large down payment, hopefully 20% or more. I would not owner finance a property unless the buyer has a vested interest. Collect as high an interest as possible and consider selling the note to a note-buyer.
Many self-employed people are good candidates for owner finance terms. They have cash, but have difficulty qualifying for traditional financing.
I think the key here is to collect a large down payment, hopefully 20% or more. I would not owner finance a property unless the buyer has a vested interest. Collect as high an interest as possible and consider selling the note to a note-buyer.
Many self-employed people are good candidates for owner finance terms. They have cash, but have difficulty qualifying for traditional financing.
- wetdawgs
- Contributions:39574
Usually people who are looking for owner financing are those who can't get regular financing due to credit issues, high debt ratios or other reasons. There is a reason these people can't get loans, so why do you want to take the risk?
- Mike Satterlee, "Mike Satterlee"
- Contributions:608
Cons - most mortgages these days have a Due On Sale Clause. This requires that the loan be paid in full when/if title to the property is transferred. Thus if you have a mortgage and offer seller financing you could run afoul of this contractual obligation. If the lender found out they could call the note due - meaning you/seller would have to pay the loan off.
Pros - it's a great way to make a decent return on your money while helping a buyer into a home that they might not otherwise been able to afford or qualify for. I would suggest having a real estate attorney assist you with setting this up however.
Pros - it's a great way to make a decent return on your money while helping a buyer into a home that they might not otherwise been able to afford or qualify for. I would suggest having a real estate attorney assist you with setting this up however.
- Steve Neuenschwander, "SteveNeuen"
- Contributions:281
I have only had one personal experience and it was a nightmare that I have been living for 2 1/2 years and that was with a law office handling it for me. The best deal is interest only with the total of the note due on last payment. The percentage of gain on your investment can be several times fold. The one I did was a 5 yr interest only at 10.08 per cent with the principle due on last payment. The gain would have been 300 per cent. However after one year the buyer walked away leaving me 18 months of taxes with penalties. Now I am stuck with a house that has dropped in value by 40 per cent so that big dream is dead. I am leasing it as I speak. I share this merely as an example. If you go this route make sure you act as a bank would act and get both a credit report, an employment history and possibly a criminal background check. You acquire some excellent knowledge of the buyers ability to pay. Trust no one. Do this on your own. If I had to do mine all over again, I would get 10 to 20 percent down and write it as a conventional loan where the buyer is paying both principle and interest. Should it go south you get a bigger return on your shorter term investment and more income from the sale. If your home is not free and clear you may need to get the lender's permission. I also would not do it without the assistance of a real estate attorney.
- Jackie Griffin, "JackieGriffin"
- Contributions:610
Great return on your money, as it beats any rate that a bank or CD or bonds are paying out right now or in the near future. Write the offer with a balloon or make the interest rate adjustable.
- x88
- Contributions:13
You didn't say whether you would be the primary lien holder or second. Those are two different risk levels. But owner financing is great if the person buying the house makes the payment. It's bad when you become the collection agent. Over what term would you feel comfortable lending this buyer money, knowing that there is a possibility that they may have circumstances where they are unable to pay. Then there's the process of getting the house back and seeing what condition it is in. Would you lend this buyer your money---the same amount of money that you would get from selling the house outright? If not, then you might be better off selling it and investing elsewhere.
- Nelson Weaver, "NelsonWeaver"
- Contributions:3
As Brian mentioned, doing any kind of owner financing is risky. Typically if there are financing issues, the potential purchasers are either stretching their financial payment limits or already have a history of nonpayment. Having said that, I recommend never carrying back more than you can afford to never get paid for, because if they do default, you will most likely never get any money back and will probably just end up accruing attorneys fees trying to protect your interest when the house goes toward foreclosure...
- Brian French
- Contributions:147
Certainly a few of each. I've personally sold several properties and taken back 20%. On the plus side, this makes your property more attractive to buyers who might not otherwise get conventional financing. The buyer will not have to pay PMI. You will be able to ask a premium price for your home, and you will be able to earn interest on the money that you are financing.
On the negative side, you are taking a huge risk that the buyer will default. You are in second position behind the primary lender, so if they foreclose, there is little chance of you getting paid. You may actually need to pay the bank off so as to protect your investment thereby getting the house back.
In the end, if you can't currently sell your home and it is becoming a burden, then offering financing is a great way to get ride of it.
On the negative side, you are taking a huge risk that the buyer will default. You are in second position behind the primary lender, so if they foreclose, there is little chance of you getting paid. You may actually need to pay the bank off so as to protect your investment thereby getting the house back.
In the end, if you can't currently sell your home and it is becoming a burden, then offering financing is a great way to get ride of it.
I'm considering selling my home with a seller finance option. Pro's and con's?
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