Seller Financing Can Be Beneficial If You Avoid Making Mistakes
Owner financing is an alternative method of seller your home, where you the homeowner enters into a mortgage contract with a buyer who wants to purchase your home. Owner financing usually yields full market price for the home and a good rate of return. Here are 6 ways to insure that your risk is minimized.
1. Ask for a cash down payment of at least 10% on the purchase of the home.
2. Ask for other security. If you are comfortable with the buyer, but the buyer does not have the down payment requirement, ask for additional security like a car title that can be used for additional collateral.
3. Check their credit. There are many options for obtaining a credit report. Have the buyer obtain a credit report with a credit score and bring it with them when applying for the loan. Bed credit is okay, as long as the issues have been resolved and they have recovered financially.
4. Trust your instincts. It has been proven time and time again that your first impression is usually the correct one. If you have a funny feeling about the situation, it may be best to walk away and find another buyer.
5. Consider the whole picture. If the bank is willing to loan the buyer 90% of the homes value, and is okay with you holding a second mortgage on the house if the buyer puts 5% down in cash, it’s a win win for everyone. The whole picture is you’ll be getting 95% of the value up front, even if the buyer never pays a dime on the second mortgage. Worst case scenario is that you foreclose on the house that the buyer paid you 95% of the value for.
6. Talk to an attorney. Determine what the foreclosure period is in your state. Each state sets different periods for foreclosure through the courts. Knowing these things can help you sell in the safest way.
Providing seller financing allows you to get the most money possible for your home. Be smart about it and this can be a winning transaction for you and the buyer.
Hubert Miles is the founder of Waterfront Houses USA, an online real estate listing service that offers Waterfront Homes and Waterfront Homes For Sale in the US and Canada.
