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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.
Owner financing is a good option for you if your house or property has some kind of defect or limitation that prevents bank financing.
I am not sure it's a good idea for you to agree to a contract with buyers who are unable, for income or credit reasons, to get bank financing. If they are good credit risks, a bank would loan them money.
Make sure there are provisions you get paid first and no other liens allowed
Make sure the taxes and insurance get paid every year
Know the rules for foreclosure and make sure the attorney draws up as favorable note as possible for you.
Get above market interest
Realize it is likely you'll be in possession of the property again
That is exactly how we sold our resort condo. We did get the property back, used it of a couple years then sold it. The profit from that re paid for a year of college for two kids.
Owner financing is a good option for you if your house or property has some kind of defect or limitation that prevents bank financing.
I am not sure it's a good idea for you to agree to a contract with buyers who are unable, for income or credit reasons, to get bank financing. If they are good credit risks, a bank would loan them money.
Had a very similar situation with a 5 acre farm. What we did was a "Land Contract". In your area they're called a Contract for Deed, or Land Installment Sales Contract. The major difference is that you retain the deed until the final payment is made. So if they do fail to pay, there is no foreclosure because you're not a lienholder; you still own the house! Their payments revert to rent and you have your house back.
We're in the 5th year of our 5 year contract and are very happy. The young couple needed a break because of past credit problems due to losing a job, so we went this route to give them time to repair their credit. Now they are shopping for a mortgage for the last "balloon" payment, and we're actually considering offering another contract for a longer term to just finish it off. It's nice to have the steady income and pocket the interest instead of the bank. Of course it could have been a different story with another couple.
You would definitely want a knowledgeable lawyer to draw it up!
Owner financing is a good option for you if your house or property has some kind of defect or limitation that prevents bank financing.
I am not sure it's a good idea for you to agree to a contract with buyers who are unable, for income or credit reasons, to get bank financing. If they are good credit risks, a bank would loan them money.
OP, read that last line and remember it. You are not a bank, and there are tons of horror stories about someone who tried to do something good for someone else by either loaning them money or financing something for them, and most ended up not good. I was in credit management most of my adult life, and there is a reason people have to qualify for loans and financing.
Once they are in your home they can destroy it and even be hard to evict if it comes to that. No good deed goes unpunished, and the courts are full of people , like you, who tried to do this.
Had a very similar situation with a 5 acre farm. What we did was a "Land Contract". In your area they're called a Contract for Deed, or Land Installment Sales Contract. The major difference is that you retain the deed until the final payment is made. So if they do fail to pay, there is no foreclosure because you're not a lienholder; you still own the house! Their payments revert to rent and you have your house back.
We're in the 5th year of our 5 year contract and are very happy. The young couple needed a break because of past credit problems due to losing a job, so we went this route to give them time to repair their credit. Now they are shopping for a mortgage for the last "balloon" payment, and we're actually considering offering another contract for a longer term to just finish it off. It's nice to have the steady income and pocket the interest instead of the bank. Of course it could have been a different story with another couple.
You would definitely want a knowledgeable lawyer to draw it up!
I would agree with the land contract or contract for deed. I am not sure if every state permits these. Does anyone have any information?
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