IS SELLING YOUR HOME USING OWNER FINANCING IN LOUISIANA RIGHT FOR YOU?

IS OWNER FINANCING YOUR HOME IN LOUISIANA RIGHT FOR YOU?

WHAT ARE THE SELLER’S RESPONSIBILITIES IN A LOUISIANA BOND FOR DEED?

Your responsibilities are many when owner financing.  You are responsible for paying your mortgage on time, if you have one outstanding, and protecting the merchantability of your property.  If your insurance premiums are not escrowed in your loan, you must keep them in force.  

The down payment, if any, should be placed in a separate account identified for this purpose.  When owner financing using a Bond for Deed, you are basically escrowing this money until the Act of Sale. Contrary to popular belief, the down payment MAY NOT be retainable if the contract is broken and/or terminated.  According to the jurisprudentially developed Equitable Adjustment Rule, the seller is entitled to “fair rental value” only in the event of breach of contract.  What that means is in all of the cases brought before the judge in Louisiana, the seller has not been allowed to keep the down payment when the contract is breached.

IRS interest income.  You are responsible for issuing a statement of the yearly interest paid to you by the purchaser so they may deduct the interest they have paid on their tax return.  The interest you receive when owner financing is considered income and you must claim it according to IRS publication 537 (2009).  Talk with the person who prepares your tax return.

With that said, the question is “Why would I sell my property by Bond for Deed?”

It can give you an edge in this over inventoried housing market.  
The purchaser has to meet your “lending criteria” which is going to be substantially less cumbersome and less costly than regular financing.  Owner financing has become more popular since the economy downturn has severely affected the ability of purchasers to obtain financing.  Many sales fall through at the last hour due to underwriting conditions purchasers are unable to meet.  

If you are behind in your payments and want to avoid a foreclosure, a Bond for Deed may help work your loan situation out in a favorable manner.  The payments you receive from owner financing changes your cash flow situation, freeing you to negotiate any arrearage and assist you in bringing your payments current.  Owner financing can get you on the road to repairing your credit as the loan stays in your name.

If you are being forced to move due to a job transfer, family illness or other matter, a Bond for Deed may give you the advantage of a quicker sale.

You have no repair obligations to the property.  If the roof needs replacing, the cost is the purchaser’s burden.  The same goes with the A/C unit, plumbing, electrical, etc.  Owner financing instead of renting your home relieve you of those responsibilities.

Foreclosure proceedings are expensive and can take a year or more to finalize.  With foreclosure, there is no guarantee you will get your property back, if you wanted it.  In the event of a default, the cancellation of this type of owner financing is a very simple and inexpensive procedure which can get your home back on the market within 60-90 days.  

Give me a call if you are thinking about purchasing your next home using owner financing.  We are here to help.

Did you miss the Purchaser's responsibilities blog?