The Fastest Way to Sell a Home – Owner Financing

As a seller, you probably expected to find a good buyer by paying cash. Due to the subprime crisis, it’s much harder to get a loan approved now than it was a year or two ago. Lenders have become much stricter with their requirements. Sometimes it works that way and sometimes it doesn’t. However, certain homeowners could be missing out on a beneficial opportunity. If you are a seller with a large amount of equity in your home, you may be able to take advantage of this beneficial opportunity if your homeowner finances the sale of your home.

There are two main benefits to the homeowner financing the home they are selling, and of course there is a certain amount of risk involved, but the benefits may outweigh the risks in your situation. A buyer may be willing to pay a higher price for your home at a higher interest rate if you are willing to help them by owner financing the home. These people may, for some reason, not be creditworthy to obtain a conventional loan. Herein lies the risk; there is a possibility that they may default on the loan.

The seller with large capital can obtain a higher interest rate by offering a mortgage to the buyer than the interest the homeowner would receive if the money were deposited in a bank account. This method of investing your money appeals to some of the older sellers because they may be thinking of their retirement days not too far away. Unfortunately, there are those who are vulnerable when the buyer defaults on their payments.

By offering owner financing to a buyer, the seller will give the buyer either a first mortgage or a second mortgage. Being the riskier second mortgage, it comes with a higher interest rate than the first mortgage. The challenges facing the seller would be to qualify the buyer to ensure that the buyer’s income is large enough to make the payments. Obtaining the document to create the mortgage for the buyer, you will want everything documented; as proof of transaction details in case you need them. Protecting you from the loss of all or part of the capital invested to create this financing, in case the buyer defaults on the loan.

Qualifying the buyer can be easier than you think. The buyer can easily obtain their credit scores from the credit reporting agencies and show them to them. The preparation of the necessary documents to create this mortgage can be accomplished with the help of some online services. It is recommended that a lawyer review the document to ensure that it is protected and that everything is legal and correct.

It is common knowledge that some buyers will default on their payments. Foreclosure would be a plausible next step, but it can be a difficult and expensive procedure. This is one of the reasons homeowners avoid financing their own homes.

Knowing the risks involved with owner financing is still a lucrative way to invest your home equity. You can always sell the real estate note you create through your real estate attorney to an investor for a lump sum of cash instead of receiving monthly payments over time.

Leave a Reply

Your email address will not be published. Required fields are marked *