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In my case the house was a small house and needed a lot of work. The buyer offered more than the place was worth it appears, he lived next door and wanted it.
I got a down payment of $40,000 and $200,000 due in 3 years. I get $1,000 interest each month. My realtor knew the buyer and said they are rich and will pay. So the combo of a good price and $1,000 interest each month I was willing to take the deal. They are up to date on the interest.
They were going to fix the place up but never did and they are now selling it. So as part of the escrow I should get the $200,000.
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
34,725 posts, read 58,067,115 times
Reputation: 46190
Quote:
Originally Posted by Listener2307
Why would someone accept those terms? I (a buyer) can get that anywhere.
You really need to offer something a mortgage company can't offer.
We are going to sell our rental properties in a few years. We are going to self finance, and to a qualified individual we will take 5% down and about 15 years.
Yes, you REALLY want to offer a 'higher rate / service' than a bank.
as a private lender you can (should):
get better returns than a bank
better be careful that buyer has 'skin-in -the-game'; They can trash / strip the place and leave you with JUNK / bulldozer material.
When the going gets rough, many buyers will bail out.
any unexpected capital risks? well, septic, roof, foundation, earthquake, flood...?
:
The buyer has no :
1) points
2) appraisal
3) loan fees (sometimes rolled into 'points', sometime additional)
4) credit report
Be VERY diligent to cover your risks!
BTW: it can be costly and troublesome to recover a property.
My Neighbor had to hire private investigators to accompany him to Columbia to get signatures from a person fleeing USA drug charges. (And contract buyer had used the property as a 'growing operation' so the repossessing PO had to cover a LOT of illegal utilities expenses + taxes.)
Last edited by StealthRabbit; 10-24-2016 at 08:39 PM..
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
34,725 posts, read 58,067,115 times
Reputation: 46190
Quote:
Originally Posted by Sand&Salt
Some food for thought. And most of it unpalatable, but there it is. Maybe we are relying too much on what our broker advises. ...
Be advised.... in most states brokers are very restricted on 'Advising'. And If I ever had one that did, I would seek REAL advice!!!! (The kind that will back you up in court.)
RE Attorneys are VERY cheap compared to brokers / agents ($500 hr for a GREAT RE attorney vs $5000/hr + for a so - so broker / agent who offers ZERO technical / legal advising services)
RE is DIRT simple, but can get you into DEEP trouble. I love it, and find it very fun and ez (to do in my free time; 30+ properties while doing a very demanding 60+ hours / week international career). The title company does most of the work anyway, but attorneys can help.
If you are very limited in your own knowledge, you need an advocate, and that WON'T be someone who has his hand in your pocket for $20k in 'lunch money' Often USA RE listing agents want 10% for rural homes / land I have used 3 realtors in 30+ properties (that was miserable and DOG slow enough to cure me)
I was pleased to hear when we traveled overseas this yr....
PROFESSIONAL RE sales people got a more reasonable 3-5% in other countries;
Do you have a professional appraisal on your place? (Not a 'FMV')
Is UT a full disclosure state?
Yes, you REALLY want to offer a 'higher rate / service' than a bank.
as a private lender you can (should):
get better returns than a bank
better be careful that buyer has 'skin-in -the-game'; They can trash / strip the place and leave you with JUNK / bulldozer material.
When the going gets rough, many buyers will bail out.
any unexpected capital risks? well, septic, roof, foundation, earthquake, flood...?
:
The buyer has no :
1) points
2) appraisal
3) loan fees (sometimes rolled into 'points', sometime additional)
4) credit report
Be VERY diligent to cover your risks!
BTW: it can be costly and troublesome to recover a property.
My Neighbor had to hire private investigators to accompany him to Columbia to get signatures from a person fleeing USA drug charges. (And contract buyer had used the property as a 'growing operation' so the repossessing PO had to cover a LOT of illegal utilities expenses + taxes.)
Sometimes, what you say is true. Laws differ by state, and in my state is is fairly easy foreclose and to reclaim property. It's all in the contract.
But, be real. "Bulldozer material"?
I would not sell our property with having it appraised first, and can't see why anyone would offer a mortgage to anyone without a credit report, so that part is bogus.
The OP wants 25% down and 5 percent. I still don't see why anyone would accept that, unless the buyer had some sort of credit issue, and those people (A) should not be loaned money, and (B) rarely have enough cash to cover 25% anyway.
In our case, we would sell to one of 2 people here in town, both of whom have many rental properties and experience with such things. The tax savings made by carrying the loan on these fully depreciated properties will be substantial.
If someone can't qualify for financing, and a mortgage company wouldn't risk loaning them financing why would you assume such a risk?
Then, if the worst were to happen, think about the complications to your loved ones.
Why would anyone opt to do this when facing retirement. If you intend to sell your property, simply sell it.
If you want to rent it out, simply rent it. At least you will still have the options afforded by ownership.
ETA You mention that your property is uninsurable?? That would make it even riskier for you to finance wouldn't it??
I wish it were that simple! If we could "just sell it" we would! It is for sale!
Of course it is insured. It is just not insurable for renting due to having a wood stove for heat. So can't rent it.
Why would anyone opt to do this? Lots of people do. My sister and banker husband have several of these properties they are financing.
Banks won't mortgage with a mobile home so we are offering this option.
And we already had an offer with 25% down and 5% interest but the price was too low.
Complications to loved ones??
Of course we would do credit checks and background checks.
I appreciate the comments here---good and bad. Especially from those of you who have DONE this. That's what I was looking for....
I've bought many properties with owner financing... worked out very well.
Most had issues the sellers were unwilling to address and some simply wanted a better return than Bank CD rates.
One property was a 1031 exchange and I put down 50%... seller agreed to carry for 15 years fixed at 5%... they moved to a nearby retirement community.
Their friends and family were NOT happy... Realtor even had problems but with 50% down she was OK...
On the first of each month I dropped off my mortgage payment in person... we became good friends and it didn't take long for everyone to know who I was when I came to drop off the check... many had said they wished someone would have suggested that option to them as they were getting less than 1% in the bank and my sellers were getting 5%
About 7 years in I was going to pay off the loan... the sellers said I should do what is best for me but asked if I would be interested if they dropped the rate to 4%... I said OK...
Last year the seller passed away and paid off the loan...
Every time I have been involved it is a win/win for all....
Maybe half of the transactions have some component if only a 80/10/10 sale.
Thanks for sharing this, Ultra. I appreciate hearing about your experience. From my research, it can be a win/win in a slow/bad market which is the case here.
We will talk to a real estate attorney for certain before committing to anything.
Thanks for sharing this, Ultra. I appreciate hearing about your experience. From my research, it can be a win/win in a slow/bad market which is the case here.
We will talk to a real estate attorney for certain before committing to anything.
" which is the case here"
apples to oranges
Your property has a lot of drawbacks
#1.....you stated it can't be sold via mortgage because banks don't want to lend on mobile homes and acreage
#2.....you stated it can't be rented out due to wood heat and complicated solar system
#3....you stated it has been for sale for a long time with no one interested
#4....you stated there are lots of places for sale where you are.
Do you really think a buyer like UltraRunner would be interested in buying your property with all those limitations?
Maybe only if the price is so low he can't pass it up .
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I have used 3 realtors in 30+ properties (that was miserable and DOG slow enough to cure me)
