Owner Financing, lease to own, Any experts willing to speak with me?

[AlanB]

Had a freind ask about selling his daughter our house with owner financing.

Others calling on the FSBO sign in the front yard have asked and I have said a constant NO, but with this individual, backing up his daughter it is something I would consider.

I do not have a good grasp of the in's and out's of this, or what to watch out for, so any advice would be appreciated.

TIA

Al B

 

[Double Orange]

Alan, I've owner financed several homes. 1] I get full price 2] Have buyers pay all closing cost 3] Get min. 5% down 4] Get x-tra 3% down to cover legal cost, if you have to boot'em 5] get credit score 690 or higher 6] get 1%- 1.5% higher rate than FHA charges 7] Have them list you on their home owners insurance policy as... addittionally insured 8] you collect or verify taxes and insurance are current 9] verify references 10] hope you don't have to owner finace Good Luck! Frank

 

[Seat_Time]

The first house I bought I had the owner finance it. I had regular monthly payments as if it were a conventional 30 year mortgage, but there was a baloon (for the for the entire payoff amount) that was due no more than three years out. This way, the seller/financer knew they'd not be on the hook for more than three years...and I had up to 3 years to find conventional financing (work on my credit score). As it turns out, I was able to go with a bank about 15 months into the deal.

 

[randy41]

most of the time if someone asks you for seller financing and its not a second mortgage its because theres a problem with the buyer getting a first mortgage from the bank. is the individual backing up his daughter with security on the loan?

 

[AlanB]

most of the time if someone asks you for seller financing and its not a second mortgage its because theres a problem with the buyer getting a first mortgage from the bank. is the individual backing up his daughter with security on the loan?

I am assuming credit problems are why I was asked, was told it was a problem with income (he is a commisioned salesguy) But the short version is, yes, the father would have to be backing the note for me to think about this.

I guess it would be a deal between us and the daughter, but it would not happen without the father being on the line as well.

The whole deal of owner financing and Renting makes me a bit nervous, but the Housing market is going to hurt for a bit here in this town over the next 15 months or so and I do not really want to carry this house for over a year before I do something with it.

 

[dooleysm]

I went FSBO as well and had MANY calls about the house that started off asking if I would 'sell on contract'. I told them it was a possibility and never heard back from any of them. I lucked out and found a recently widowed retired guy who was looking to move into town and had cash.

I rented the house for about 18 months before trying to sell it and had it on the market for about 6 months. This was several years back though, in much better conditions.

I despise realtors and was thrilled to not have to resort to one.

 

[hitekcountry]

If the bank won't loan you money, then neither will I and if the bank is willing to make you a loan than go to the bank.

Entering into any business dealings with a friend has about an 85% chance you'll end up enemies.

Just my opinion based upon personal experience.

I'll only loan money to someone if I'm perfectly ok with the idea that they never pay me back. Or put it another way I never loan anyone any money.

 

[rlk]

Had a freind ask about selling his daughter our house with owner financing.

Others calling on the FSBO sign in the front yard have asked and I have said a constant NO, but with this individual, backing up his daughter it is something I would consider.

I do not have a good grasp of the in's and out's of this, or what to watch out for, so any advice would be appreciated.

TIA

Al B

Al, have you thought about renting to them with the option to purchase? This gives you a chance to see how reliable they will be making payments. At the end of the contract, you decide if you want to sell to them or not.

Bob

 

[California]

DoubleOrange and hitekcountry's replies both have to be considered. Don't go into this with anyone you would be uncomfortable booting out on the street and suing for their last dollar as soon as they screw up. No family, no friends too dear to lose, etc. And get a down payment sufficient that you make a profit on the deal if they default the property back to you.

Given all that, it can work. I bought my first rental on a 'Contract of Sale' (agreement for a future sale) with even worse terms. It had been sold to an 'investor' who trashed it so it was repo'd by the long term owner. My down payment to him was a month of my labor to fix it back to rentable condition, plus immediately take over payments - while it generated no income. It worked out and I signed a formal purchase after a year in this high-risk gamble. The seller and I were both honest about expectations, capabilities, and consequences and it turned out as well as we both hoped.

Later when I sold and carried back the note, it was to an honest buyer but then he 'flipped' it to a snake. I had a couple years of headaches then finally came out ahead. See:
http://www.tractorbynet.com/forums/projects/106742-have-you-ever-used-tractor-2.html#post1217082

 

[kenmac]

You'er friendship will ge gone if / when you have to take the house back. Or, it comes to having a court put them out on the streets for not making payments . If it's a friendship you don't want to loose , don't do the deal. good luck