Wondering how does owner financing work and how to use owner financing to sell your house quickly? The following insider information will reveal secrets bankers don’t want you to know.
Out of the ” 8 different types of seller financing strategies ” that exist, the wrap around mortgage was one of more powerful ones used to sell houses in the 1980’s, when there was a deep recession like now and when the interest rates were in high 18’s and low 20’s.
Real estate agents and brokers were faced with a major problem in the 80’s selling their clients houses at those street loan sharks interest rates. Owner financing became a solution for home owners who could not sell their homes due to the recession. The wrap around, was also used for those facing foreclosure and thinking about doing a short sale on their house.
It simply involves the prospective person purchasing the house, where he or she gets a complete home mortgage from the home owner selling the home and not the local bank. The home owner selling the property takes the position of the lender ( the bank ) and then the buyer will now pay the home seller every month for the life of the loan.
When Does One Use This Option
Home Seller – When the home owner has run into problems selling the house and just can not wait any longer to sell the house.
Buyer – If for some reason the prospective buyer cannot get financing through traditional means like going to their local Chase or Citibank branch for a home loan
Lender Loan Restrictions – The bank will not finance a particular type of property for what ever reason.
How does Owner Financing Work?
It is quite simple – The home owner ( you ) eliminates the bank from providing a home loan to your prospective buyer. You as the home seller take some form of advanced payment from the buyer to secure the property & provide the home loan instead of the bank.
The terms of this loan is all in a contract drawn by your attorney, it is a written promise to pay which requires the buyer to make monthly payments to you as the home seller for the agreed time in the contract.
The house buyer with a trust note in his possession, has a binding contract as the buyer of this property legally, all without any red tape from a local bank. An additional legal piece of document lays out the right to take the property back if the buyer does not make his payments as agreed upon.
What Types of Property Are Good For Seller Financing?
If the home owner is in some form of distressed situation and need to sell the house quick, or the property is in pretty poor shape, or the just sitting there and not rented out, then he or she may consider seller financing.
Things to be considered is when the property has a some form of tax lien or mortgage attached to it. This option is most suitable when the house is free and clear of any existing loans on the property.
8 Ways You Can Benefit From Owner Financing
* Speedier sale.
* No waiting for bank approvals.
* No bank or origination fees to the buyer.
* The process and document preparation is much lighter.
* The down payment can be made smaller to sell quicker & appraisal avoided.
* Flexible terms can be arranged for you and the buyer unlike bankers.
* You may be able to get closer to the price you are looking for since you are financing and the buyer is having trouble getting financing from traditional lenders.
* You may make future income from the interest rate you set to the buyer.
Most home owners object to this type of financing arrangement, primarily due to not receiving full payment of the sales price when their house is sold. The Solution use what is called a ” Double Closing “. You the home seller, just sells your note to a note buyer immediately right after the right after the closing.
Everything remains the same when the note buyer purchases the note, terms * interest stay the same and this in no way affects the house buyer.
Issues with Owner Financing
The biggest issue with this option is, it seems to difficult to do, but with the help from an attorney it can actually be a simple process.
Another issue is, to being sure about the buyer and how responsible they will be. Different creative solutions can be applied like getting 2 – 3 advanced monthly payments.
If the buyer defaults the home seller feels like they are not equipped to handle this, but with the right attorney and help you the seller can repossess the property.
Owner financing – if used properly is a very powerful creative financing tool to get your house sold right away, if it sounds like a possible solution that you would consider, seek out professionals that use these themselves and are familiar with them to explain to you how does owner financing work.
Now that you are more educated about owner financing, and wish to learn more… here are 8 tips for selling your home using seller financing are 8 types of seller financing
Now that you know how owner financing works, discover the 8 different types of owner financing home sellers have used to sell their home. Visit our blog category section “house selling tips” for more helpful information… Click Here Now: How Does Owner Financing Work.