Profile picture for user0120623

OWNER CARRY AT VERY LOW RATE WITH PRE-PAY

We will be making an offer on a house owned by a senior who WANTS to carry the mortgage.  I feel that the price is too high still however we could offer full price with
hhim carrying the first mortgage with 10% down and maybe only 1% -2% interest rate, for the 2-3 years.  To make him more comfy we could prepay the entire term.  We have other funds coming to us so could put a big chunk on the home at the end of the term or pay cash.  What are the negatives for the owner?
  • June 03 2012 - Elk Grove
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Answers (5)

Profile picture for Ofe Polack
I suggest that you have an appraisal of the property done prior to making the offer, that way you will know if you are paying fair market value of the property.  Usually owner financed properties carry a large downpayment, which becomes non-refundable and higher than conventional interest rates.  The terms of the contract are as important as the opportunity given to you, so I suggest that you have an attorney write the contract.
  • June 04 2012
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Profile picture for hpvanc
If you buy at market value the negatives for the current owner are about the same as holding any other single mortgage note, his eggs are all in one basket. 

If I were you I would insist on an appraisal, putting 10% down and letting the owner carry the note, increases the risk to both of you if circumstances change and you need to move sooner than you anticipate if you are overpaying for the property. 
  • June 03 2012
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Profile picture for wetdawgs
An owner who is willing to finance tends to be looking at interest rates available at the bank vs interest rates being charged for a commercial loan and would like to earn the same.

You can try any approach in your offer, but of course the owner can counter.   You will have to have a strong argument why you think the house is worth $50,000 less than the asking price. 
  • June 03 2012
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Profile picture for user0120623
Hi thanks for your reply.  Ok so the owner could look at this as 'playing games'? hmm I had not thought of that, I thought he would be impressed!My idea would be to give him the full price and we get the lower rate, however we could take $50,000 off and give him the higher interest rate.
I truly wanted a clean offer and not fuss around with going back and forth.
thanks
  • June 03 2012
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Profile picture for wetdawgs
I would make the offer at the price you think the house is worth rather than playing games, and offer to pay fair market interest rate or higher.  

Are you eligible for conventional financing?   The risks to the owner vary depending on your status.  
  • June 03 2012
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