Owner financing

You may be better off offering a lease/option if you can get enough rent to more than cover your payments/expenses. What are the rent comps in your area?

When you sell your property, technically the lender that has your mortgage would need to be paid off in order for the title to transfer to the buyer's name. Otherwise the sale would be known as a subject-to (which you can find more info about in one of Elena's threads).
You could owner-finance the equity portion of the sale ($23,000). That may be a plus for the buyer.

In a lease-option, this would give you some up-front cash to work with (the non-refundable option money), and a little bit each month for cash-flow. Of course, you would also need another place to live.

Lots to think about. Try reading through the threads on these subjects. LOTS of good ones in here.

Rina

This may help you gain a better understanding of exactly what OWNER FINANCING is all about

http://www.deangraziosi.com/node/4037

Do you think that it would be a good option in this case?
Can a person owner-finance more than the equity portion? Or would that just create a wrap-around/sandwich mortgage?

Rina

Hi Rina

They COULD do that and in a lot of cases with owner financing you always expect to pay MORE than you normally would or FMV. So if it is valed at say 100K FMV, and you sell at 110K Owner Finance, someone may jump on it because maybe they could not get conventional financing, so it really just depends on the deal and the people themselves.

Bt to answer your question...you can sell your property for whatever you want, if you have someone that wants to buy it.

Final question (from me. ).
So if a person was to sell for $220K and owes $197K, how would the owner-finance look? I'm just stuck on thinking you could only owner(seller)-finance the $23K, since that's how much equity/______ (oh, what's the word?! is it "interest"?) you have in the property.

Rina and Anita thanks for your help. Maybe if I explain my situation you will better be able to guide me in what to do.

The schools in my neighborhood and the neighborhood itself has gotten really bad since they began section 8 housing in the surrounding developments over the past few years. I want out! I put my house on the market a few months back and got no response.
I have recently contacted an owner who has multiple houses I will be assigning. He also has one that I want to purchase for my family. He has offered me everything from owner financing to lease purchase on this property besides going down $ 50,000.00 on the RV. I don't want to loose out on this house. However I cannot afford to pay my mortgage while I am waiting to sell and rent or mortgage on another property. I have to sell my house in order to move into this one.

How can I offer my house at an advantage that will make it sell in today's market? I have taken the price down to the lowest I can. I thought if I offered owner financing or lease purchase it might move. I thought of renting but with my house being so large I am afraid I will get the dealers and rif raf that this neighborhood is currently renting to only more of them.

What can I do?

Hey Carol, Offer A Lease Option on your home, this will attract a "plethora" of buyers and get your house SOLD a LOT quicker. Plus, because your offering "TERMS" i would set my asking price a little bit ABOVE FMV, so when it comes time for your buyer to "cash you out"(when he/she gets a loan @ the end of the option peroid) you'll have recieved "chunks" off cash on the "front end"(lease option consideration) and on the "back end"(when the buyer actually purchases the property with a loan). Just make sure you "screen" your possible tenants/buyers carfully, you want to make sure that you CAN HELP them get a loan/approved at the end of the option peroid, it's o.k. that their credits damaged, but NOT totally ruined to the point where they can't get a mortgage, within 12-24 months of ON-TIME payments to you, SULLY

Thanks Sully! you said..."you'll have recieved "chunks" off cash on the "front end"(lease option consideration) and on the "back end"(when the buyer actually purchases the property with a loan)". Please explain what you mean.

Isn't lease option the same as renting? How much should I require down? Any suggestions on screening potential tenants/ buyers?

How do I average the total monthly amount to charge for lease purchase. Let's say my mortgage payment is $1,900.00 a month.

Speaking of owner financing I have a question.

Suppose Gorman sells some land via owner financing to Larry. Larry builds a home on the land, but fails to make his payments to Gorman.

Does Gorman have the right to take back the land with the house on it free and clear?

Zeek

Just Kidding, Any way, what i meant, by recieving chunks of CASH on the "front end" and the "back end" was: when you do a LEASE OPTION(as a seller) your entitled an "OPTION CONSIDERATION" of any where usually between 2%-5% of the selling price, but i've seen investors charge as much as 10%, so it's really up to you.

Now for the "chunks" of CASH on the "back end", the meaning behind that is, when you sign the lease option agreement with your tenant buyer for, lets say 18 months, well before he/she moves in they'll give you the "OPTION CONSIDERATION" as i stated above. Then your going to charge ABOVE MARKET RENT, meaning: If other properties in your area are RENTING for $1,800 and are similar in size, BR's and BA's, with your house being the same type of house( style: colonial, twin, and year of house), then you'll charge like $2,000 per month and you have the OPTION of putting aside a certain amount of their payment towards the down payment @ the end of the lease, so even though your charging what you think is a MUCH higher RENTAL RATE, it REALLY wouldn't be, cause your applying that extra $200(or more, it's up to you) towards their DOWN PAYMENT, so you(the seller) would apply $3,600 towards the PURCHASE PRICE @ the END of the LEASE. So, whats ALL this mean for you, well let's start by saying: your house is now SOLD, over that 18 month time frame you've recieved $100 CASH FLOW($1,800 when it's all said and done) PLUS, the $5,000-$10,000 that you recieved from the OPTION CONSIDERATION, PLUS the PROFIT you recieved when you actually SOLD(when your buyer "cashed you out"). Remember, you can bump your asking price up higher, because you are being "FLEXABLE" on TERMS, any tenant/buyer will GLADLY pay you a little higher than market price, because NOBODY else will finance him/her, cause of their "credit issues", i know that this is a LOT to take in when you know nothing about this way of buying/selling property, but it's one of the BEST ways to SELL and BUY property, SULLY

The answer to that question i think would be, Gormans property, because the land is NOT his yet, you know what? This question is a LOT more complicated than originally thought, If larry already signed a QUIT CLAIM DEED over to Gorman, Hopefully the NOTE specifies the collateral to be foreclosed on. If Gorman sold the property on "CONTRACT FOR DEED" then in that case, i would tend to think, definitley Gormans, cause Larry has to make a certain number of payments BEFORE the property is DEEDED to him, i think, SULLY

Great advice Sully!!! I've done alot of research on the "option to buy" with countless information....you've managed to "put it in a nutshell". Nice work...Teach

Another great class from the ultimate professor "Sully"!!

I tried.....It's kinda hard to explain the WHOLE process of LEASE OPTIONS, without spending a couple of hours on the computer and starting a New Forum on LEASE OPTIONS, SULLY

Sully,

You Are My Hero!!!!

I agree, there is alot that goes into "lease with option", but, again, I believe that you gave a great summarization!!!!

Kudos to you

I've gathered much info in "option to buy" vs "rent to own".

I will try to get my info in order and start a forum for this. It seems that many are looking for this info. It is a great avenue for anyone wishing to start with no credit, or, for sellers to use in a "down market".

Thanks again Sully!!!

What happens to this "OPTION CONSIDERATION" if they break the agreement, damage my property or don't pay their rent? Is it like a security deposit that they get back at the end of the 18 months? Do I put it in an escrow?

sorry for so many questions but I have never even thought of renting my house let alone how to do it.

Also, if I do FSBO what is the procedure? I have always had a real estate broker handle the sale of my house. never did it myself. then again there are allot of things I would have never considered doing myself until now.

There's a saying ... " if I only knew then what I know now" I would have saved allot of cash!!!!

Carol,

The option consideration is yours no matter what. If they choose to exercise the option to buy then the consideration will apply towards the purchase price. Otherwise, if they don't exercise the right to buy, its yours to keep.

As far as FSBO, as investors I think most would agree to sell it yourself. Look at all the info on owner financing and Lease options. This site can supply you with everything you need.

That way you will get more money for your house, and and the same time attract more buyers.

PS. Thanks Sully!!

Good luck, Zeek

Carol, i think your best options is lease options. I'm in the same situation with you in terms of renting versus lease options. It all depends of what you want to do with your house. I understand that if you rent it out, then your worry about tenants trashing the place, but that's why it's important for you to screen all your tenants as Sully stated.

In my case, i'll be renting my house, but the person who will be renting from me actually want to purchase the house in the future. She wants to rent from me for a year, and then do a lease option after that in the second year, until she decide to purchase the house. Once i exercise the lease options in the second or third year depends on the lease option deal, then i will go to an escrow company to get the deal done.

As far as the chunck of $$ Sully mentioned above, that's the money you get up front when you decide to exercise your option. The upfront $$ is the two or three months of what you will be leasing the house for. I think it's important though that you do your research of the comps in your area to determine how much you want to lease or rent your house for. You want to make sure that the lease payment or rent if you decide to rent covers all your mortgage payment, taxes and insurance.

For example, if your mortage payment is $1,900.00 make sure the payment includes taxes and insurance, but if not, i suggest you do so, and add a little more for cash flow if you can. Good luck and keep us posted.

Lloyd

There are different ways to establish the sale price when the buyer excercises the option. You can determine current value and adjust the price based on appreciation in the area. You can establish a price before starting the lease. You can base the purchase price on an appraisal at the time of sale. Be sure you clarify this in the lease contract.

Al

Sully is right in all his wisdom. Man I love the term "plethora". Sully speaks the truth Carol. Lease option that prop and get out...Jan

Now as you can see....carol, i believe that this would be an excellent choice(lease option) for selling your house, and one more thing, the actual tenants/buyers that you will be interviewing will be a little more inclined to "take care" of your property, because these tenants are actually BUYERS, their in the mindset of thinking that it's "their" house, so the odd's of them "TRASHING" your house go DOWN. As i said, screen your possible tenants/buyers thoroughly, SULLY

I have a question...

How do investors purchase the note on a property and then offer owner financing to the buyer?

Is the note what is owed on the property or what the property is being purchased for?

Is this done as a double closing or is the note purchased before the buyer purchases the property?

I am asking this because I have several buyers interested in my property but the banks are spitting them out like a bad taste. I figured if I could offer them owner financing it would help with the sale.

Just another one of my "gotta know" questions.

Interesting topic, I am waiting to see what the reply to Carol's question will be, this could be helpful to many of us. Thanks Carol.

Sandra