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Sellers on Long Island are actually doing that? I wouldn't. I think it's really risky, but I suppose if one gets a stable buyer, it could work out. That is providing you can wait for the proceeds of your house and take it payment by payment for years. In the past I had only heard of that being done in places like Florida where it has always been hard to unload houses (probably due to the terrible wages down there).
Yah, I just sold a house yesterday to a great guy who has bad credit and the only way for him to get a mortgage was through owner financing. The buyer has $60,000 to put down on an adorable $340,00 house (It even has a rental income). But credit being bad....NO ONE is getting a mortgage these days and there are quite a few people out there who were able to get a mortgage even 5 months ago with bad credit...but those days are over....
So we searched for owner financing and were surprised at how many we found. I guess homeowners are in a bind becaues they can't sell....so they are willing to take cash up front and have the rest paid off for a specific period of time --this being 3 years and then the buyer has to acquire their own mortgage so that gives them 3 years to repair it. Also, the Interest at 5.9 percent is very fair --I thought they would ask more considering--
So there are other possibilities to selling your home.
Yah, I just sold a house yesterday to a great guy who has bad credit and the only way for him to get a mortgage was through owner financing. The buyer has $60,000 to put down on an adorable $340,00 house (It even has a rental income). But credit being bad....NO ONE is getting a mortgage these days and there are quite a few people out there who were able to get a mortgage even 5 months ago with bad credit...but those days are over....
So we searched for owner financing and were surprised at how many we found. I guess homeowners are in a bind becaues they can't sell....so they are willing to take cash up front and have the rest paid off for a specific period of time --this being 3 years and then the buyer has to acquire their own mortgage so that gives them 3 years to repair it. Also, the Interest at 5.9 percent is very fair --I thought they would ask more considering--
So there are other possibilities to selling your home.
Why am I not understanding this. Is this kinda of like renting with the option to buy? Is the house actually in your name while you repair your credit. and do you need a substantial down payment to make this work?
I actually have a co worker with 4 kids that is interested in a community like that and needs a house that size. Would someone mind passing on the listing details? MLS number?
here is some info on it. IMO it sounds like a bad idea for everyone.
This deal is completely different from that one. Owner gets $60,000 up front and finances the house for only 3 years. At the end of 3 years he gets his own mortgage or sells it.
It's good for people who have been sitting on a house for a long time and can't sell it because mortgages are hard to get now. They really are hard to get!
Why am I not understanding this. Is this kinda of like renting with the option to buy? Is the house actually in your name while you repair your credit. and do you need a substantial down payment to make this work?
Each deal is different...it's what the seller agrees to. It's not the same as rent with an option to buy....where part of your rent goes towards the down payment. But with the Rent with an Option to buy each deal is different as well...
People are being creative because the market is so strange.
I will say that rentals are in abundance since everyone who hasn't sold has decided to rent their home......being a rental agent, it's nice to have good stock!
But I wonder how many people could afford to go the owner-financing way. How many people have the luxury of not paying off their primary mortgage when selling their homes? I'm willing to bet that for the vast majority of seller wannabes this would never be an option they could consider. And for those that can wait I would think that holding onto the property for three years would present the potential for a higher sale price after the eventual rebound.
I understand the rental option completely because at least then you might be able to generate enough income to meet your monthly obligations until the market rebounds in a few years. That was my Plan B last year which fortunately wasn't needed.
But I wonder how many people could afford to go the owner-financing way. How many people have the luxury of not paying off their primary mortgage when selling their homes? I'm willing to bet that for the vast majority of seller wannabes this would never be an option they could consider. And for those that can wait I would think that holding onto the property for three years would present the potential for a higher sale price after the eventual rebound.
I understand the rental option completely because at least then you might be able to generate enough income to meet your monthly obligations until the market rebounds in a few years. That was my Plan B last year which fortunately wasn't needed.
I think what I'm seeing is that people are doing this because they can't sell their house....and because most of these people who are doing the owner financing own their homes outright. Everyone I encountered who was offering owner financing were the over 60 generation --and more than likely they might own their homes outright. I guess for them...better to take cash upfront and get money every month with interest for awhile rather then sit on a house they can't sell?
They could sell it if they priced it for what it was truly worth instead of the inflated valuations from the bubble period. Valuations like that are long gone and the market is taking them back down, waaay down, to where they should be. A correction.
The old folks can sit on those houses as long as they want, but they will never see inflated valuations of the last five years. "Normal" appreciation won't return to the market for a very long time either.
If a person is putting down $60,000 on a $340,000 home (17.6%), but has such bad credit that a bank will not lend to this person, why should the seller take this risk? If the new owner does not pay, the owner will have to spend time and money on foreclosing. In NY, the foreclosure process can sometimes take up to a couple of years. Also, to have the loan baloon in 3 years is dangerous. We are obviously not in a period of hyper growth where you can expect the home to be worth substantially more in three years and assume that the buyer will be able to refinance his way out of it. This was a good deal for the buyer but very risky for the seller.
There are just a couple of situations in which I might recommend owner financing to a seller. The first would be a situation where the seller wants to minimize the tax that they have to pay. This would be for investment properties or primary residences where the profit from the sale exceeds the $500,000 marital exclusion. The strategy is that the seller does not have to recognize the profit until it is actually received, so by spreading the payments out over a number of years, he will pay at a lower rate.
The other situation would be a seller who does not need the money in a lump sum and is just going to stick it in a bank CD (maybe someone who is retiring). Then, if the buyer is making a good down payment, and has excellent credit, and good income (get it? You want to check them out just like the bank would) AND if you can get a better rate of return then in a long term CD, you might want to consider holding the mortgage. The benefit to this excellently qualified buyer is that they will have far less closing costs then they would from a bank.
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