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Old 09-03-2008, 09:07 PM
 
Location: Houston, Texas
10,425 posts, read 43,516,050 times
Reputation: 10328

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To the Mortgage Loan people:

If you buy a home with owner fiancing, how do you take your interest deductions with the IRS ? Of course lenders give out a 1098 mortgage interest statement but what about the private owner holding the mortgage? Does he give one? If he does how does the IRS know a fair and legal sale took place in order for the buyer to claim their 1098?

In the future, lets say its a 30yr loan due in 5, when you attempt to secure lender financing to cover the owner finance balance, does the lender look at the history of payments to that seller? If so it may be a good idea to save every canceled check?

Any other complications with owner finance?
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Old 09-03-2008, 10:17 PM
 
3,553 posts, read 6,785,657 times
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I have sold about 50 houses on owner financing and I provide a 1099 and an escrow analysis PRIOR TO JANUARY 31st each year.

I usualy do what your describing, 30 year with a balloon in 5-10 years. Trust me, when you go to a "traditional" lender and show a solid, on-time payment history, even with a private party, you will be solid for getting financing. Assuming all else is in order. I've sold to people who were recent bankruptcy dischargees and they had no problems within about 3 years.

The IRS knows that a "fair and legal" transfer took place because whoever handled the closing (attorney, title company or whatever) gave you a copy of the HUD-1 CLOSING STATEMENT, as is REQUIRED BY LAW.

Be very careful. I know a lot of investors that sell houses on this method and OVERPRICE the house by A LOT because they know that anyone buying this way is a credit risk. So ask yourself; WHY AM I FINANCING THIS WAY?

If the answer is; because a bank won't touch me! Then maybe you shouldn't be buying yet.

golfgod
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Old 09-04-2008, 05:54 PM
 
Location: Cary, NC
1,036 posts, read 3,627,489 times
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As golfgod said. If you have an experienced owner that is doing things right then you can make this work. However, many people do not do it correctly.... they do not file the rent income, do not submit the 1098 statements to their tenants or overprice homes.

Ive run into plenty of "investors" that have no clue when I ask for their Schedule E on tax returns (rental income/loss) or the 1098 statements on their owner financed transactions.
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Old 09-04-2008, 08:56 PM
 
Location: Houston, Texas
10,425 posts, read 43,516,050 times
Reputation: 10328
Thanks for your answers !!
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Old 09-04-2008, 09:37 PM
 
Location: Apple Valley Calif
7,475 posts, read 19,565,214 times
Reputation: 5575
There are loan servicing companies set up to handle such purchases. I have been involved with such companies on several occassions.
it cost me $50 to set up the paper work, and $10 a month on top of mortgage payments.
They do all billing, collectiong, and provide yearend statements to both parties. A real bargain in my estimation...
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Old 09-05-2008, 08:32 PM
 
Location: Houston, Texas
10,425 posts, read 43,516,050 times
Reputation: 10328
Quote:
Originally Posted by Donn2390 View Post
There are loan servicing companies set up to handle such purchases. I have been involved with such companies on several occassions.
it cost me $50 to set up the paper work, and $10 a month on top of mortgage payments.
They do all billing, collectiong, and provide yearend statements to both parties. A real bargain in my estimation...
Sounds like a good idea. What are they called if looking them up in the phone book? Isn't what they do simular to what a title company does?
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Old 09-06-2008, 07:30 AM
 
Location: Fort Myers, FL
1,286 posts, read 2,594,674 times
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They are called CPA's, lol, I have several that do the billing/filings for clients and there tenants.
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Old 09-07-2008, 07:25 PM
 
Location: Apple Valley Calif
7,475 posts, read 19,565,214 times
Reputation: 5575
Not CPS's, most won't mess with such things... You need someone who specializes in this type of deal Here are a couple of examples,
FCI Lender Services, Inc. is the premier Loan and Foreclosure servicing and management company nationwide.
Del Toro Loan Servicing
Fremont Reorganizing Corporation or..
AOL Search (http://aolsearch.aol.com/aol/search?encquery=ff900e13ef405a8e1d0dba75931bc6f1c0 d77827a071c701&invocationType=keyword_rollover&ie= UTF-8 - broken link)
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