Re: Owner Financing - Do you know of any good websites on this subject?

Question

I'm selling my home in Texas. The buyers want me to do the financing. I'm completely lost - any suggestions?

Answer 1

Speak with a real estate attorney regarding this. What it means is the buyers can't qualify for financing, so basically they move into your house and make the house payments to you. Normally, you cannot have a mortgage on the property, so you must have enough equity in the home to do this.

The following is from www.michaelbluejay.com regarding it. Personally, I wouldn't do it!!!

Owner Financing

You might be thinking, "Hey, could I just make payments directly to the seller instead of getting a mortgage? Then I wouldn't have to qualify for the mortgage." That indeed could be a good deal, except that owner-financed deals like this are rare, and are available only when the seller is unusually desperate, generous, or stupid.

Put yourself in the seller's shoes for a minute:

You own a $150,000 house, and you've got $110,000 left on the mortgage. If you sell it the regular way, you'll wind up with $40,000 in cash. (You'll get $150k from the buyer -- part down payment, part mortgage from the buyer's bank -- of which $110k will go towards paying off your existing mortgage before you even see the money.) You could do a lot with that $40k: make a down payment on an even bigger house, travel the world, add it to your nest egg to retire, go to Vegas, etc.
But let's say you owner-finance the sale instead, in which you get a down payment from the buyer, and let him/her make payments to you for 15-30 years. First off, you won't be getting as much money up front -- $15k on a 10% down, or $30k on a 20% down. Second, you'd have to pay off the existing mortgage before you could sell it! So you'd have to pay your bank $110k in cash, before you get the measley $30k down payment.

But what if you own your house free and clear? That is, what if you've already paid off your 15- or 30-year mortgage so you didn't have to worry about coughing up a lot of money to pay off the loan all at once? Then in that case, you don't get your $150k all at once -- you have to accept the small payments that trickle in month after month from the buyer.

Why on earth would you do this? Well, probably, you wouldn't, unless you're really desperate to sell for some reason, or you don't understand what a rotten deal it is for you, or you're unusually generous.

So you see, it's not in the seller's interest to finance the house for you, which is why you'll rarely find houses that are owner-financed.

But there are a couple of cases in which owner-financing might be a possibility for you:

You offer a higher interest rate. The reason that owners don't like to finance is that there's nothing in it for them. So you have to make sure there is something in it for them. One way to do this is to offer to pay a higher interest rate. Of course, you wouldn't make such an offer if you're able to qualify for a bank loan, but if you can't get a bank loan, then offering a higher rate directly to the seller might be what it takes to get you into the home you want. Also, once you've had the home for a year or two and your financial situation improves you might be able to move that loan to a bank.


Get the seller to finance part of the loan. Once I wanted to buy a home but I couldn't come up with the last $36,000. (I had no more cash left and couldn't get a bigger loan.) But I really wanted the house. So I asked the owner to owner-finance just that small part of the cost of the house, and I offered him twice the prevailing interest rate. He accepted. A year later I was able to easily move that loan to a bank at half the interest rate, so I only had to pay the higher interest for one year.

Answer 2

Find different buyers. Do you really want to be in the collections business?

Realtors have standard forms if you really want to do that.