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Old 11-20-2014, 08:32 AM
 
991 posts, read 1,512,921 times
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Selling a farm...yesterday a guy approached asking about doing owner financing, property is listed for 1 million. He mentioned 10% down, 2 years of financing. I have a mortgage on the place, seems very risky to me and I told him NO but wanted to learn more about it from the CD team.

Not sure if he would move here or just use it as a commercial horse boarding business, which of course raises the issues of liability and wear and tear on the facilities.

Thanks for the help.
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Old 11-20-2014, 09:57 AM
 
Location: Scottsdale, AZ
2,150 posts, read 5,151,245 times
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Seller financing on a property with an existing mortgage can be risky. In theory, the bank could call the loan due (probably won't) which could put you in a bad situation. You also mentioned the issue of liability which could become a factor if the new owner has problems that could extend to you.

I would also be concerned about a buyer that cannot get financing on their own. One might want to ask why they cannot get conventional financing.

So if you are willing to take the additional risk or do not see any chance to sell the property in a traditional sale it may be OK. But if you think you can get a traditional buyer you might be better off waiting.
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Old 11-20-2014, 10:40 AM
 
991 posts, read 1,512,921 times
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Quote:
Originally Posted by AZJoeD View Post
Seller financing on a property with an existing mortgage can be risky. In theory, the bank could call the loan due (probably won't) which could put you in a bad situation. You also mentioned the issue of liability which could become a factor if the new owner has problems that could extend to you.

I would also be concerned about a buyer that cannot get financing on their own. One might want to ask why they cannot get conventional financing.

So if you are willing to take the additional risk or do not see any chance to sell the property in a traditional sale it may be OK. But if you think you can get a traditional buyer you might be better off waiting.
Thanks Joe! Confirming what I thought.

The guy is a tech guy and is in the midst of buying another company, so he says. I directed him to a Farm Service Credit union for conventional AG financing.

Again, he wanted to view the property...I requested he make sure he gets pre-approved first. It amazes me that people want to shop before they have finances secured, or at least investigated. Been there, done that...I'm tired of dreamers falling in love with the place and then finding out they can't afford it.
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Old 11-20-2014, 01:12 PM
 
Location: Mostly in my head
19,855 posts, read 65,665,464 times
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I did finance a house, not a huge property, and I was able to pay it off first. I had my attorney draw up the contract and an amortization schedule, required them to have homeowner's insurance benefiting me, and had them send me the receipt of property tax paid yearly. He was a newish professor at the local university, clearly a 2nd marriage, with a younger wife and baby. I figured if they had renewed his contract for a 2nd year, he was probably good, just had a divorce wipe his credit out. He sold it a few years later and I was paid off. Made a bucket of money as the mortgage was front-loaded with interest.
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Old 11-20-2014, 01:18 PM
 
991 posts, read 1,512,921 times
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Quote:
Originally Posted by SouthernBelleInUtah View Post
I did finance a house, not a huge property, and I was able to pay it off first. I had my attorney draw up the contract and an amortization schedule, required them to have homeowner's insurance benefiting me, and had them send me the receipt of property tax paid yearly. He was a newish professor at the local university, clearly a 2nd marriage, with a younger wife and baby. I figured if they had renewed his contract for a 2nd year, he was probably good, just had a divorce wipe his credit out. He sold it a few years later and I was paid off. Made a bucket of money as the mortgage was front-loaded with interest.
Yes, it would be a different matter if I didn't have a mortgage on it.
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Old 11-21-2014, 08:52 AM
 
8,544 posts, read 12,314,446 times
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Quote:
Originally Posted by gray horse View Post
Selling a farm...yesterday a guy approached asking about doing owner financing, property is listed for 1 million. He mentioned 10% down, 2 years of financing. I have a mortgage on the place...
If you have a mortgage on the place which you don't intend to pay off, owner financing is probably a moot point. There's probably a due-on-sale clause in the mortgage which would preclude--or cause great problems--with a seller-financed deal.

Even if that weren't the case, providing Seller-financing is not something to enter lightly. Proper legal advice would be a definite must. Generally, a Land Contract (aka Contract for Deed) would be better than offering a purchase money mortgage (since Deed doesn't transfer until contract is paid in full; easier to foreclose) but things can go sour with a Land Contract as well. It's easier--procedure wise--to evict a tenant than a Seller-financed purchaser; hence the reason why some people engage in Lease with Option to Buy contracts instead of outright sales. No method is risk free...and since, in these instances, you're usually dealing with someone who can't secure traditional financing, your risks are increased.

(By the way, not that it appears to apply here, beginning in 2014 under Dodd-Frank, certain requirements and restrictions are placed upon some seller-financed transactions--mostly involving multiple deals by investors.)
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Old 11-21-2014, 01:26 PM
 
Location: Paradise
3,663 posts, read 5,656,540 times
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I would be worried, too, that this is your nasty neighbor that is still trying to get your property dirt cheap. He could be using due-on-sale end run to get you in a pickle when informs your lender of your owner financed sale. You would be forced to sell it fast, giving him an advantage.
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Old 11-21-2014, 05:34 PM
 
8,544 posts, read 12,314,446 times
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Originally Posted by Everdeen View Post
I would be worried, too, that this is your nasty neighbor that is still trying to get your property dirt cheap. He could be using due-on-sale end run to get you in a pickle when informs your lender of your owner financed sale. You would be forced to sell it fast, giving him an advantage.
You're quite the conspiracy theorist!
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Old 11-21-2014, 09:02 PM
 
Location: Paradise
3,663 posts, read 5,656,540 times
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Quote:
Originally Posted by jackmichigan View Post
You're quite the conspiracy theorist!
I guess I have been around people who are sneaky and devious too long. *sigh*

I have seen people do crazy stuff like this (like my ex husband). Her neighbor is a real jerk based on what I read in another thread.
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