IS PURCHASING YOUR HOME USING OWNER FINANCING RIGHT FOR YOU?

IS OWNER FINANCING YOUR HOME IN LOUISIANA RIGHT FOR YOU?

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

What are your responsibilities as a purchaser in a Bond for Deed transaction?
They are many and are very similar to your responsibilities of outright home ownership.

First and foremost, your payments must be made on time.  Unlike a traditional mortgage, when you fall behind on your payments with this type of owner financing,  the owner/seller can, in a very short period of time, cancel the contract and have you removed from the premises.   There is no lawsuit to file.  You will get notice that you are behind.  Demand will be made for the entire amount of money it will take to bring the payments current.  If the delinquency is not satisfied within a certain time frame, you are going to have to move.

Maintaining the home in its entirety is 100% of your responsibility.  If there is a leak in the roof, you have to have it repaired.  The same goes in regard to the A/C unit, siding, fireplace, plumbing, flooring, electrical, pest control, lawn care, etc.  Failure to maintain the property is usually a violation of the owner financing contract you sign.  The document will spell out the extent of your maintenance responsibilities.   Read and understand it well.

Your contents are NOT INSURED!!  Again, your contents are NOT INSURED!!
The portion of your monthly payment designated as the insurance escrow payment is to pay for and renew the owner/seller’s existing insurance policy.  The owner/seller usually has no content coverage as he has no contents in the property.  His insurance policy covers the structure to be rebuilt or repaired if damage is caused to the property.  His flood insurance will replace flooring, walls, etc. but NOT YOUR CONTENTS.  Not your furniture, washer, dryer, clothes, etc.

You must obtain your own content policy for hazard, wind & hail, and/or flood if your possessions are to be protected.  

Can you deduct the interest you pay?   With this type of owner financing contract, you may be entitled to deduct the interest you pay on your tax return according to IRS publication 537 (2009).  Talk with the person who prepares your tax return.

Should you purchase a title exam at the time of the Bond for Deed transaction?  The title examination will reveal what is of record against the property you are going to purchase.  It may be the deciding factor to purchase or not purchase the property using owner financing.  It will reveal the “of record” financial stability of the seller. (ie. Liens, judgments, foreclosure filings, child support judgments, etc. that have been filed in the court records)  This is important because the title is going to remain in the seller’s name until you formally purchase it.

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

Photo compliments of Aarin Free Photo