Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Moving to a house we already have in another state. This place is completely paid for, so anything we get will go straight onto the mortgage on the other place.
So you’re willing to risk financing someone who obviously can’t get a loan, but you won’t list with a realtor who could probably just sell it? Makes no sense to me!
You’re getting a lot of interest from lookers and dreamers. A realtor can weed that crap out! These sweet people are probably going to end up screwing you if you “finance” them. Don’t do it! Too many risks!
We've had our house and 10 acres on the market for two months, FSBO. Lots of interest, but no offers yet. What we've discovered is that there are a lot of lookers and dreamers out there, but none have been actively READY to make an offer, mostly because they haven't put their own house on the market yet.. (Yes, we know that using a realtor would alleviate that problem, but that's another story). Anyway, along the way we've met a few very sweet young couples who are just starting out and could use some help, so we're considering owner financing. I've done a lot of reading on the subject, but would like to hear from people who've actually done it. Any advice would be greatly appreciated.
My DH and I have done Owner Financing on 7 properties, land and/or houses in the past 20 years. It can be done but don't let your good heart takeover. It is a business deal. We asked for 20% down in all but one case. We charge 8% interest and that has been negotiated by a few people. Terms also vary. Some we do for 15 years most of them were 20 years. We have a prepayment penalty in case they sell it before the term of the loan. We also set up a direct deposit account so there is no excuse when the money isn't there. We do have a 3 day late fee.
Make sure you have a good contract and make them carry insurance.
Of those 7 three paid off the loan, two are still paying and one piece of land we got back and resold right away for cash. The last one we knew was a risk so we did "our version" of an lease option. We gave them a 2 year deal where they made a downpayment and 2 years of monthly payments. payments. If they were in good standing after the 2 years we would let them use that money as their downpayment. Then we would start a 20 year loan for them at the sale price we agreed upon. After 22 months we got the house back. We also made them responsible for any repairs on the house while they lived in it.
Quote:
Originally Posted by CGab
So you’re willing to risk financing someone who obviously can’t get a loan, but you won’t list with a realtor who could probably just sell it? Makes no sense to me!
You’re getting a lot of interest from lookers and dreamers. A realtor can weed that crap out! These sweet people are probably going to end up screwing you if you “finance” them. Don’t do it! Too many risks!
Many business owners have trouble getting loans and are not always a bad risk. Also if the property doesn't appraise for your price the banks won't approve the loan.
I would never do owner financing with a Realtor. They get full commission but i take all the risk and if I get the house back the Realtors already got paid.
My DH and I have done Owner Financing on 7 properties, land and/or houses in the past 20 years. It can be done but don't let your good heart takeover. It is a business deal. We asked for 20% down in all but one case. We charge 8% interest and that has been negotiated by a few people. Terms also vary. Some we do for 15 years most of them were 20 years. We have a prepayment penalty in case they sell it before the term of the loan. We also set up a direct deposit account so there is no excuse when the money isn't there. We do have a 3 day late fee.
Make sure you have a good contract and make them carry insurance.
Of those 7 three paid off the loan, two are still paying and one piece of land we got back and resold right away for cash. The last one we knew was a risk so we did "our version" of an lease option. We gave them a 2 year deal where they made a downpayment and 2 years of monthly payments. payments. If they were in good standing after the 2 years we would let them use that money as their downpayment. Then we would start a 20 year loan for them at the sale price we agreed upon. After 22 months we got the house back. We also made them responsible for any repairs on the house while they lived in it.
Many business owners have trouble getting loans and are not always a bad risk. Also if the property doesn't appraise for your price the banks won't approve the loan.
I would never do owner financing with a Realtor. They get full commission but i take all the risk and if I get the house back the Realtors already got paid.
The interest is what makes sense.
What I meant was get a realtor and find a buyer who either can pay cash or do a traditional loan. But if you’re willing to accept the risk then I would at least require a big down payment and stipulations that are spelled into a contract. Personally, I wouldn’t do it, but that’s just me!
This is what we're thinking. Five years of payments with a balloon after the five years is up. That should give a young couple time to build their credit, which helps them, and we could go ahead and get the place sold, which helps us.
If they can't qualify for a loan now, what if they can't qualify for a loan later? You shouldn't count on them improving their credit rating--it may not happen.
Quote:
Originally Posted by AmeriMurph
Moving to a house we already have in another state. This place is completely paid for, so anything we get will go straight onto the mortgage on the other place.
What if they stop making payments? Will that impact your ability to pay on your mortgage? Don't let their inability to pay become a problem for paying on your own mortgage.
If you don't need the money, a Land Contract may be something to consider, but given the low interest rates I wouldn't recommend it on a primary residence at this time. A Land Contract would be easier to suggest if you were dealing with a rental property. I've done several Land Contracts--both as a Buyer and a Seller. Some work out (they always work out when I'm the Buyer) but some can turn out to be nightmares. A Land Contract can be worse than simply renting the property because it may take longer to get a property back. (And the condition in which you get the property back may be the same as with a bad tenant.) The foreclosure process for a Land Contract should be spelled out in state law. Make sure that you know what it is for your state. In some states, it can be done relatively quickly (if the purchasers cooperate), but in some states it can be a rather lengthy process.
The good news is that if you decide to sell on a Land Contract, and it doesn't work out, at least you'll have an interesting story to tell on C-D.
What I meant was get a realtor and find a buyer who either can pay cash or do a traditional loan. But if you’re willing to accept the risk then I would at least require a big down payment and stipulations that are spelled into a contract. Personally, I wouldn’t do it, but that’s just me!
Absolutely. Strong contract, large downpayment, and a higher interest rate. It has to be on your terms or no deal.
I've done it several times as buyer and once as seller...
My sellers love me... the current home was at 5% and when I was going to refi several years in the sellers asked if I would keep the loan with them at 4%... I was looking a 3.875 at the time... I said sure and we recorded the loan modification...
They were looked at as very astute at their retirement community... most of their friends had sold their home of years and had the money earning 1% in CD's and my sellers were getting 4x that.
Each month on the first I would hand deliver my check... everyone soon got to know me and that is how there friends said they were smart...
Some even got mad at their Realtors for telling them NOT to carry.
I put down 40% and it was As-Is...
The property I sold needed a lot of work... it was a family property with several owners and just didn't have time to be the unpaid grunt with so many opinions... found a contractor looking for a spot to live and keep equipment... put down 20% and it's only been 14 months and the payment is here on the first and he has done an amazing job...
What I am saying is it can be a win/win...
The downside is waiting to get your money and if it all goes South starting over by first taking possession and then selling again.
Of course you need to enforce the insurance clause and need to be named...
OWC financing was more popular pre-S&L crisis because in the olden days, loans could be assumed by a buyer. That's how I bought my first SFH relatively fresh out of college. It was a dark period of high interest rates in the teens. I assumed a 7% FHA first that represented about 1/3 of selling price, the seller did an OWC interest only at 10% for 3 years and $10,000 cash down payment sealed this deal.
But read on, it's a great story.
Three years later, interest rates were still high. The seller, a military person living across the states, contacted me wanting to know if I wanted an extension because my payment history was good. I said yes so we did another 3 years with the same interest only and 10% rate term.
There's more.
Three years later, interest rates were good and I was looking to buy up. Again, the seller contacted me wanting to know if I wanted to extend again. I told him that I was moving up and would he be interested in loaning me an additional $50,000 on top of the $35,000 I owed. He said yes. So we did an $80,000 loan at 8% interest only for 3 years. I moved up but kept the home I had purchased thanks to his OWC financing and turned it into a rental. Three years later we extended and three years later we extended. The entire relationship lasted almost 20 years.
I was in a debt reduction mode in my life but made a promise that his debt would be the last to be repaid. He was now a retired person and a fixed-income type.
I got a call from him the last time and he wanted to extend again but at that point in my life, it was time for his debt to go. He told me I was the best investment he ever made and I told him how grateful I was because he allowed me to purchase a home during a time that would have been difficult for me. I sent him the $80,000 I owed but kept his name and number just in case.
There's more to the story but I'll stop while I'm ahead.
Bottom line: OWC can be a win-win outcome. I'd be open to OWC as a seller at this point in my life but would want at least 30% down payment and have the first position, not the second position he had when we did the deal 37 years ago.
THE END.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
