Seller Financing
Can someone explain to me a little about how owner financing works? What type of contract is made? What type of interest rates? How can you sell this idea to a seller? and anything else you can tell me would be great.
thanks,
Ric.
I to am also interested in this topic.... Interested in Buy and Hold... Again, what options can you bring to the seller.. Thanks...
Owner financing is exactly that. The owner becomes the lender in the transaction. You have an attorney draw up the paperwork. Basically it is a security agreemnt between 2 parties. The way to sell it to a seller is, number one, they must be motivated to look at options other than conventional methods. These may be people who have suffered job loss, transfer, medical problems, divorce, or who might not have enough equity in a property, and maybe the house is in various stages of disrepair. Another type of motivated seller is one who may benefit from a steady income rather than a lump sum payment. The approach to this is simple. Find out what they will be doing with the proceeds. If they are going to let it sit in the bank, ask them whate rate of return they expect to get. Then compare what they will earn vs what you are willing to pay them and convince them that they will be many dollars ahead to sell it your way.
Hope this helps,
Shawn(OH)
i'm working on a deal where the owner is willing to carry 20% of the selling price, and the property is being sold $100,000 under the apprasised value. The morgage broker i talked to said i should be able to get a loan on the appraised value not the selling price. So i will end up buying with nothing down.
If the seller is just going to put the money in the bank at the currant rediculas interest rates, you might offer him to carry at say 6 or 7 % a lot better than the bank will pay him, and it would be secure with a first trust deed on the same property. The benifit to you is no bank is involved at all, very little paper work, no loan fees ect...
john
Quote:
On 2004-03-29 15:30, j_owley wrote:
i'm working on a deal where the owner is willing to carry 20% of the selling price, and the property is being sold $100,000 under the apprasised value. The morgage broker i talked to said i should be able to get a loan on the appraised value not the selling price. So i will end up buying with nothing down.
If the seller is just going to put the money in the bank at the currant rediculas interest rates, you might offer him to carry at say 6 or 7 % a lot better than the bank will pay him, and it would be secure with a first trust deed on the same property. The benifit to you is no bank is involved at all, very little paper work, no loan fees ect...
john
Will the bank be able to tell that you have made this deal with the seller? What about when they ask you if you have made any prearranged deals? I tried this once and the stupid realestate agent said he will no be apart of this. Guess he is not very creative. Does the owner of the property have to disclose that he is carrying 20%? Did you have this contract drawn up by an attorney? Let me know more about the type of loan financing you are getting through your broker? Would the bank appraisal have to be done on the property ahead of time to know the exact value? Most of the time the seller will not pay for an appraisal ahead of time before you get the loan? Any other info you have would be great thanks....
The bank will not be able to tell if you record the MTG deed and Note yourself. Most of the time when 20% is used it is used as the down payment. So it looks like that a downpayment. If you are using the 2nd mortgage for that reason. The appraisal always has to be done first on this type of deal. Most of the time the buyer pays for the appraisal.
Hope this helps
Lori
[addsig]
Please tell me the name of a lender who will lend on a new investment purchase on the appraised price and not the contract sales price. I do not believe it.
Brenda
There are lenders out there who dont care if the owner is carring back paper it will actully help seal the deal since you may not be able to get that high of an LTV because of your FICO DTI or if you work a stated DOC or no DOC it helps to seal the deal.
There are lenders out there who dont care if the owner is carring back paper it will actully help seal the deal since you may not be able to get that high of an LTV because of your FICO DTI or if you work a stated DOC or no DOC it helps to seal the deal.
what is your interest rate on this type of Loan?
The interst rate depends on the credit depth, credit history, and debt ratio
Lori
[addsig]
most of these replies assume you are trying to get a second from the seller so as to reduce your downstroke. Not always the case. Sometimes you can get the seller to give a lower rate than a lender.
I'm negotiating a deal on a vacant commercial property. A lender would want a very high rate to compensate for the lack of income. My plan is to redevelop the property into a self-storage. So I ask the seller to carry a first mortgage for 90% of purchase at 5% interest. No commercial lender would do such a loan but the seller is at least seriously considering.
Now, I will have to use some of my money (or in this case my investor's money) to do the rehab and that money is much more expensive. But the blended rate is still lower than a lender and the underwriting is much easier to deal with.
Mark