Maybe you have a unique house, but it does not appeal to many buyers, or the market has become soft. Whichever the reason, maybe you have decided to sweeten the pot by selling the house with owner financing. However, before you take the leap of faith, this article informs you about what owner financing involves and how you can sell your house using the method.
It is not hard to find a property buyer interested in one that is being sold through owner financing. You can choose to mention it in your listing to provide the enticement, but the chances are that your client will suggest the idea. It is not a good idea to make this move without thinking carefully since you will also be selling your house without an agent.
Take your time and figure out why a client might need owner financing. There are several reasons why he might not be able to get a mortgage from a bank. Maybe he has a poor credit score or might not have spent enough time in his current job to qualify for a mortgage.
Before selling your house, ensure that your potential buyer fills up a loan application form and ascertains that they have provided accurate information. Conduct a credit check and go through the references and identify their employment and monthly or annual. Make sure that you complete all the steps a traditional back would before approving a loan.
2. Reach the Deal
It is important that you ask for a down payment since you have the right to do so. Note that you are taking risks, so make sure that you are given some amount before reaching the deal. In this case, the good thing is that you have the freedom to negotiate the amount you are supposed to be given without any interference from the government or any financial institution. It all depends on how much money you are willing to take from the deal.
Make sure that your buyer gives you enough money to let you move to a new house comfortably. After all, you are doing your client a huge favour by letting them get a house through owner financing, and they need to return the same.
Note that owner financing should be kept short-term since you don’t want to be collecting your house money for the rest of your life. Therefore, make sure to keep it between 1.5 and 5 years maximum.
3. Close the Process
Once you have decided to sell your property through owner financing, you should be ready to move out of your house as soon as possible. It is important to close this form of loan in short order because you don’t want to deal with individuals involved in real estate transactions.
If you don’t fully own the property and there is an unpaid mortgage against it, it is important that you first seek approval from your lender. It is not entirely impossible to sell such a house, but the process might be bureaucratic since a lot of paperwork is involved.
What to Expect as a Seller
It might look like this type of transaction favour buyers who are credit-challenged or those looking to secure the property without stringent circumstances. But as the seller, you also have something to gain. You will be able to collect from the loan, interest for a period of up to five years, and it could even be longer.
The interest might be more than what you might have earned if you used the proceed from the traditional sale and invested the money. If you change your mind about the entire deal, you are free to sell the promissory note because many investors are always ready to purchase them as long as the buyer has proved their creditworthiness.
The Bottom Line
There is nothing wrong with selling a home with owner financing. However, whether you are selling for the first time or are used to the process, it is important that you do your due diligence. Make sure that you find out whether your buyer will be able to repay the loan on time without being followed up and down. Be sure to collect enough personal details to help you track them down in case they delay the payment.