Owner Financing

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The mainstream media is currently trying to tell everyone that the housing market is getting better, looking up, showing promise. OK, where? As I have said before, the housing market is like every other market place, some cycles are great for the buyer and sometimes the market is great for the seller. Right now it is most definitely the buyer’s time. So, “where are the buyers?” you say. The ones that can buy are getting the best deals they can in REO’s and foreclosures. They are not going to waste their money buying in the retail market when there are so many half-priced houses on the market. The other buyers that are interested in your house are still waiting for the bank to approve them for a loan. Out of all the potential buyers in the market right now, only a small percentage can get funding to actually buy.

So, how do I get my house sold without giving it away? Simple; you provide the funding. There are plenty of buyers out there, but many can’t get a loan. There are even more houses on the market to choose from. Therefore, it is important for you to stand out and provide something no one else will: owner financing.

Most of the general public won’t finance their personal house because they are afraid. They don’t know what to do. Well, here are some basic steps to make it easy and get your house sold closer to the price you want.

Step 1- Offer the financing – tell everyone.

Step 2- When you get a PRICE you can accept, check their credit (truecredit.com, annualcreditreport.com, it should be at least a 640). Now iron out the terms, which should include:

– Down payment – If you don’t have to have the money right now, ask for enough to cover moving expenses. Lower the down payment, the higher the price they usually pay.

– Terms – you can get the balance amortized on any finance website and print it out as a payment schedule. You could ask for a set amount every month until the balance is paid in full. My favorite is seller pays the current mortgage payment, insurance and taxes for 60 months with a balloon payment at the end. This means all house expenses are covered for five years and then a lump payment of the balance at the end of five years. You can structure it any way you want, just be reasonable. Good terms will compensate for a high price. Try offering the terms first and then the price you want.

Step 3 – Fill out the sale agreement. Most transactions will involve a realtor and they have their own documents, but if it doesn’t, you can get a sales agreement online or at any office supply stores. Please make sure it has these items:

– Who is selling and who is buying

– Legal description – you will be closing with an attorney anyway (highly suggested), have them fill out the legal description for you; you don’t want to mistakenly sell the empty lot down the street because of a misprint.

– Owner finance and terms – if you have a mortgage on the property, a couple ways you can do this (have the attorney help you): you hold title until the final balloon payment has been received; sell the property “subject-to” the current mortgage; or a lease agreement with option to buy at end of the lease.

If you own the house free and clear, you can write the agreement any way you like, along with the buyer agreement.

– Inspection period – allows buyer time to inspect the house before purchase; it’s only fair.

– List of items staying with the house

– Signatures

There are some other papers required, such as a termite letter and lead paint disclosure in case the house is older than 1976, make sure your attorney briefs you on these.

Step 4 – GO TO CLOSING – new things are always scary the first time, but you got your house sold and you didn’t have to give it away.

Lean on your attorney to help you through this, make them earn their money.

WHAT happens if they default? I don’t know how to handle that. Many attorneys offer escrow services. This means the payments go to the attorney, they charge a small fee each month. They send the rest to you. They can handle the foreclosure if there is a default; you get the house back and sell it again. By this time, the market may be better and you won’t have to owner finance and you got even more for your house than before. It’s not hard, just let the professionals do the hard work for you. You’re paying them to be your tool, use them.

Getting your house sold should be more important than the fear of the unknown. Get the facts and    “git-er-dun”.