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I have a home that someone is interested in buying. The home is owned by me, free & clear. The buyer is inquiring if I would do a owner carry for 1 year and they would put down 10%. The buyer owns a home now and is trying to sell it but they want to move to my home BEFORE they sell their home.
The buyer already has an FHA Loan on their home they are trying to sell. So, that leads me to conclude that NO BANK will give them a loan for my home, as they currently have a loan out and getting a 2nd loan in today's market is next to impossible.
I know there are dangers and risks involved with "owner carry". If they default, I have to spend $3k-$6k in foreclosure costs. Also, if they damage the home, I have to spend $$$ fixing it back up, so I can try and sell it later.
I believe 20% down payment would be better, but if they can get 20% down, then they could probably go through a bank and not need an owner carry, UNLESS the bank will NOT give him a second loan even with 20% down. In today's market, most banks do not want to give out a loan, PERIOD, let alone a SECOND home loan.
Are you working with an agent? Have your agent run their credit and pre-approval anyway just to substantiate even considering an offer like this. Also put a clause in the contract saying the the downpayment is non refundable and will become litigated damages if they choose to back out.
I have a home that someone is interested in buying. The home is owned by me, free & clear. The buyer is inquiring if I would do a owner carry for 1 year and they would put down 10%. The buyer owns a home now and is trying to sell it but they want to move to my home BEFORE they sell their home.
The buyer already has an FHA Loan on their home they are trying to sell. So, that leads me to conclude that NO BANK will give them a loan for my home, as they currently have a loan out and getting a 2nd loan in today's market is next to impossible.
I know there are dangers and risks involved with "owner carry". If they default, I have to spend $3k-$6k in foreclosure costs. Also, if they damage the home, I have to spend $$$ fixing it back up, so I can try and sell it later.
I believe 20% down payment would be better, but if they can get 20% down, then they could probably go through a bank and not need an owner carry, UNLESS the bank will NOT give him a second loan even with 20% down. In today's market, most banks do not want to give out a loan, PERIOD, let alone a SECOND home loan.
Any input on this would be appreciated....
Banks are granting loans on second homes every day as long as the buyers can afford it. Even with 10% down.
Are you working with an agent? Have your agent run their credit and pre-approval anyway just to substantiate even considering an offer like this. Also put a clause in the contract saying the the downpayment is non refundable and will become litigated damages if they choose to back out.
Great legal advice, but the term is "liquidated damages." Of course the downpayment would already be nonrefundable, since it's a portion of the total payment for the home. This isn't a land contract, it's a regular purchase where title would transfer at closing, but the difference is that the seller would lend the buyer a portion of the purchase price to be repaid in one year, and the seller would then have a mortgage on the property that would be second to the buyer's mortgage.
You don't need an agent to run a credit check on someone, and you can't do so unless the person has authorized you to do so.
Get the buyer's permission to run their credit. Make sure they have sufficient funds to make two mortgage payments. Have an attorney write the land contract up for you. It's a one year ballon loan.
Land contracts weren't too popular in the past few years since anyone could qualify for a loan, but I'm seeing a lot of them along with lease options. Many people are wanting to do exactly what this one is where they just want to get settled in their new home while their other one sells. Rather than move twice.
I have a home that someone is interested in buying. The home is owned by me, free & clear. The buyer is inquiring if I would do a owner carry for 1 year and they would put down 10%. The buyer owns a home now and is trying to sell it but they want to move to my home BEFORE they sell their home.
The buyer already has an FHA Loan on their home they are trying to sell. So, that leads me to conclude that NO BANK will give them a loan for my home, as they currently have a loan out and getting a 2nd loan in today's market is next to impossible.
I know there are dangers and risks involved with "owner carry". If they default, I have to spend $3k-$6k in foreclosure costs. Also, if they damage the home, I have to spend $$$ fixing it back up, so I can try and sell it later.
I believe 20% down payment would be better, but if they can get 20% down, then they could probably go through a bank and not need an owner carry, UNLESS the bank will NOT give him a second loan even with 20% down. In today's market, most banks do not want to give out a loan, PERIOD, let alone a SECOND home loan.
Any input on this would be appreciated....
Well.. you have to look at it as a seller and a mortgae person now..
First.. they are putting 20% down.. that's a good thing.. if they don't get the mortgage you will atleast have had t 20% cash in hand even with the charges to foreclose.. it would be like you rented it (well that is depending on the $$of the house.. lets say $200K.. that's 40K you have in cash). I'm sure they are not going to purposefully give you that kind of money and then stop paying the mortgage with you.. and if they do , youforeclose and you made $40K for the time they are in the house..
but.. what is the situation with their other house.. why are they selling.. are they foreclosing or short saling that house (one spouse is not onthe mortgage). In that case, once that is clear the one spouse willprobably qualify and all will be okay..
What are their FICO's? Ideally you may want to find someone that doesn't have something to sell but do the mortgage financing yourself to make the interestd a bank would. That's what I would do if I hada house free and clear.. owner financing is awesome!! ANd then just screen your buyers closely.
We bought a home in the 90's that was owner finance. No real estate agent fees, none of all those other zillion pesky expenses, just went into a lawyers office, signed off all the paperwork and walked out. Cost me $200 to pay the attorney fees.
The owner who sold to us (his house had been paid off for decades), had sold the house about 5 years earlier. The previous buyers had made a couple of years worth of payments then stopped paying. He kept their down payment and the several years of payments they'd made, and when they reneged he took his house back. 100% profit+house. Then he sold it again to us.
My mother owned outright a little house which she sold owner finance. Again she sold it with down payment and a contract for monthly payments. The buyer also reneged after a couple of years. She got her house back and kept his money. Sold it again. I remember her telling me she wished she had a dozen such houses to sell, it was so profitable.
Given a choice, I'd be happy to buy another owner finance. It was a simple transaction without all kinds of various agents and lenders and all their attendant fees and percentages, etc. Good deal for everybody.
The buyer already has an FHA Loan on their home they are trying to sell. So, that leads me to conclude that NO BANK will give them a loan for my home, as they currently have a loan out and getting a 2nd loan in today's market is next to impossible.
As someone who is extremely risk averse, I'd do as the bank's apparently are doing and not give them the 2nd loan. Like you said, if they were qualified to get it (credit scores, income, debt-asset ratio etc), then they'd just get it from the bank. If the bank won't lend, then I wouldn't either.
And for all the reasons you said, I'd rather not risk having to deal w/ the potential foreclosure etc. And unlike back in the day, it seems there's a real risk w/ today's foreclosed owners totally thrashing the place when they leave. So there's that potential on top of the cost/headache of foreclosure proceedings.
But that's just me. If I were the type willing to act as a bank, then I'd do Rakin's Happy Happy Note.
As someone who is extremely risk averse, I'd do as the bank's apparently are doing and not give them the 2nd loan. Like you said, if they were qualified to get it (credit scores, income, debt-asset ratio etc), then they'd just get it from the bank. If the bank won't lend, then I wouldn't either.
And for all the reasons you said, I'd rather not risk having to deal w/ the potential foreclosure etc. And unlike back in the day, it seems there's a real risk w/ today's foreclosed owners totally thrashing the place when they leave. So there's that potential on top of the cost/headache of foreclosure proceedings.
But that's just me. If I were the type willing to act as a bank, then I'd do Rakin's Happy Happy Note.
You do have points BUT..
Most liekly they will default on their first home before defaulting one they are actually linving in.
And as another poster pointed out...they own free and clear.. are getting 20% down payment that more tan covers foreclosure fees and we'll get tehouse back should they renig.
They have more to gain than loose on doing owner financing..
I would LOVE to buy an owner financed home.. no extra mortgage nonsense fees etc...
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Also, if they damage the home, I have to spend $$$ fixing it back up, so I can try and sell it later. 
