Have You Ever Completed a transaction with Owner Financing?

I had a listing and the seller was willing to carry $200k, list is now $359,900 but we did not have one bite for seller financing, I was a little surprised.

There are a lot of Wrap around mortgages being done here in Austin Texas monthly.  In Texas, the law changed a few years back making Contract for Deed "illegal" for lack of a better term, because of abuse by some (imagine that).

For the right set of parties it works great.  The key is to have an attorney draft the documents and then for the Seller to never let the Purchase get behind in payments, ever.  To start foreclosure proceedings immediately so that they know you mean business and that you are going to behave as a lender just like a big bank.  Show no mercy.  The other key is to have a ballon period in the note so that they have to refinance and to require that they meet with a loan officer (me of course) before closing.  We work together to get them refinanced before the balloon.

While your blog is interesting, it was not really about owner financing.  What's up with that?

About 2 years ago, one of my sellers offered owner financing to a contractor to fix up a burned down property my seller owned.    These can be tricky situations!    I am grateful for the California Association of REALTORS, where part of our membership fees pay the on staff attorneys to decipher these kinds of massive documents (2300 pages - really?!)  for us and create or modify our forms to allow us to stay within the guidelines of the laws.  

By the way, I'm hoping you answer #28, Jim, because I too am curious.

My understanding is that if you do more than 3 owner financing transactions in a year, that Dodd-Frank requires to get a loan originator license as if you were a big bank. Crazy stuff.  I do offer owner financing occasionally when I sell investment homes and they are typically easy to sell doing that.  Plenty of people with decent down payments and marginal credit.

Hi Jim

have never had a seller financing transaction....so surely this is good to know

thanks for sharing Jim

jimmy phan

Jim

You lost me after the first couple of lines as the rest of the blog didn't deal with owner financing. Did you copy and paste two different blogs?

Greg, #24 opined that he's better off today along with the housing market than the previous 8 years under G.W. Bush, really? What slant and how is that relevant to Jim's post? You have the freedom of speech but I don't have to drink your kool aid in this forum and I challenge anybody who agrees with Greg to email or call me directly. Unbelievable!

Owner financing would be possible if wasn't for those evil Republician's is what I'm guessing No.24 may say. I for one did really well under W. along with everyone of this panel that flipped a property or two. Let's face it, life is a crap shoot, you got to know when to roll and know when to fold...and along the way enjoy the ride.

It blows my mind to think about what they are doing to us.  It  is all about central planning.  

Owner financing is perfect for some people, sellers and buyers alike.  I have a buyer client with $20,000 cash and NO credit.  He is debt free and owes nothing to anyone.  If he were to get a mortgage he would need to pay a much higher interest rate because he is good with his money.

I had this scenario a few years ago and it worked out perfectly for all involved.  The sellers owned an investment property outright and didn't want the chunk of cash.  The buyer had no credit and a large down.

A good real estate lawyer can put together an excellent contract that everyone is happy with.  Run the deal through escrow like a normal closing and set it up with the escrow company to receive the payments from the buyer and cut a check to the sellers.  There is a small monthly fee involved, but there is never a question of when the payment is received.

Voila!  It is so perfect.  The seller's get the interest and the payment, the buyer gets the house he wants at a reasonable interest rate.  And B of A or Wells Fargo doesn't get anything.  Happy?

Dodd Frank is an abomination at best and hopefully it will get repealed after the elections....I also smiled when I read your comment about spending $200K for a $50,000 job...the real numbers are $278K!!!  AND I was HORRIFIED to discover that the AVERAGE government job is $120,000!!!!!!!!!!!! WHAAAAAAAAAAAAAAAAAAAAT???

I have not done any yet. I am interested in doing a transaction like this.

Hi Jim, in over 6 years and over 200 deals I have only done 1!  They are complicated and the worst issue is the "due on sale clause" of most mortgages.

I own a property I'd like to sell with owner financing. It sounds like there are a lot of things that need to be known before proceeding. Where can I find a good resource that will lay out the programs steps for me? 

I've sold a couple homes with owner financing, because I work with a lot of investors.  However, in traditional business it's just so rare that an owner is OK with holding back a note (and doesn't need the cash for the next house).