Owner finance - should I think more about it or no - Posted by domineaux_TX

Posted by @yahoo.com"]Larry TX on October 06, 2004 at 12:01:12:

Contract for deed is not an attractive option in Texas. There are extensive paper work requirements that the government has mandated due to percieved abuse issues. Lease option still rocks though.

Owner finance - should I think more about it or no - Posted by domineaux_TX

Posted by domineaux_TX on October 04, 2004 at 15:48:58:

I’ve got a purchaser wants to do an owner finance w/me.

I’m not against it, but thought I might just put up an inquiry type posting to ferret some things I might NOT have thought about.

Things I’ve thought about:

  1. Offer should be higher than market
  2. Need a due on sale clause
  3. Need higher rate of interest
  4. Down payment around 5%

If I want to sell note to someone after a year or so, I may need the higher selling price and higher interest rate to offset having to discount the note.

Need enough down money from the buyer there will be motivation to pay the note and take care of the property.

I’m financing the deal only because I’ve not been able to move the property through conventional means. I’d prefer to cash out within a year or two.

The due on sale clause will be enforced, because I’ll sure as heck know whose paying for it. LOL

Anyway, I’d appreciate some suggestions or intersting clauses you think I should have in my documents.

I guess you might say I’m fishing for problem areas at this point.

Re: Owner finance - - Posted by Spidey

Posted by Spidey on October 05, 2004 at 21:48:46:

A good read is on www.legalwhiz.com. He has a nice article on l/o vs contract for deed.

You really need to do a tight check up on the buyer in either case. I would make them meet with your mortgage broker to evaluate the person as well as running criminal and other background checks.

why? - Posted by Jim FL

Posted by Jim FL on October 05, 2004 at 16:31:51:

Rather than owner finance, which means the buyer gets title right away and you play the lender, why not remain in complete control?
Agreement for deed or land contract is how I’d usuaully handle a sale where we wanted more money upfront.
However, in your state there are some newer state laws (over the last couple years) which dictact certain things with regard to this type of arrangement.

Instead, since you want a mere 5% uupfront, and a higher than market price, why not use a lease option?
Put a T/B’er into the property, screen them well, collect 5% upofront as NON-REFUNDABLE option money, and a price set for 12-24 months out.
I sell a lot of houses this way, and set the initial term for 12 months.
If you have plenty of equity, there are ways to get cash out when the buyer finances…as long as the buyer does not have completely trashed credit, and decent income.
With a lease option you would not be giving the T/B’er any equitable interest in the property, which allows for easy eviction upon default.
Then again, foreclosure does not take too long in your state either…something to consider if someone has more upfront cash…this pursuading you to go ahead with owner financing.

I’d offer the home with, “No bank qualifying”, and then see what folks have to put into the house now money wise, and how soon they can cash you out.

Anyway, my vote, if your happy with the 5% upfront, would be to go with the lease option.
Upfront profit, cashflow monthly, and a decent backend with easy default remedies.

Take care,
Jim FL