Pink House Team
Keller Williams Realty
806-340-7630
OWNER FINANCING
This is the time of year that income tax refunds are about to start arriving. Many people would like to buy a house but can't qualify for the stricter bank financing. Owner financing is then a very viable option. There is a lot of confusion about how this works. Let me explain.
Owner financing, also known as seller financing is very different from a rent-to-own or a lease-option. Even though you will see advertising that says owner financing beware of the true intent.
RENT-TO-OWN
If you are involved in a rent-to-own what that really means is that you are a tenant but have all of the responsibility of a homeowner. Typically you give the owner a few thousand dollars up front and then pay a monthly amount some of which should go toward the price of the house. It is not until you have paid the house off entirely that you get the deed. You don't own it until you get the deed. Therefore, many things can happen.
Here is an example of a rent-to-own gone bad. A lady "bought" a house and made payments for 17 years to the owner. The owner died. The kids of the owner decided to step in because they wanted the house. They evicted the lady because, remember, she is nothing more than a tenant. There was nothing she could do. She didn't own the house.
A lease-option is much the same. You give the owner money (option fee) up front for the right to buy the house at the end of the lease. So again until you get the deed you are nothing more than a tenant.
A true owner financing is when you have a down payment and then you make monthly payments to the owner that include the principle, interest and sometimes the taxes and insurance in the payment. The big difference is that you get the deed at closing. You own the house. The only way you can ever lose the house is if you stop making payments and the seller forecloses. This is a legal proceeding that ends up giving the deed back to the seller. It is much more complicated that an eviction. That could be why some owners prefer to do the rent-to-own scenario.
UP-FRONT CASH
One of the appealing things to people that really don't know the risks, is that rent-to-owns usually require less up-front cash than an owner finance. The reason, of course, is because the seller can do a simple eviction to get you out so the risk to them is minimal. On the other hand, if you get the deed the risk is much greater to the owner, therefore, they require more down payment. In addition, on a rent-to-own there are no closing costs because you don't "close".
At the Pink House Team we only do true owner financing. It is my opinion that I would not be representing my clients to the best of my ability if I allowed them to put themselves and their money in jeopardy.
Please contact me for more details on the procedure and for an estimate of down payment and closing costs for a house that would fit your needs!
Pamela Madore
Pink House Team
Keller Williams Realty
7304 SW 34th
Amarillo, TX 79121
806-340-7630
http://pinkhouseteam.com
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