As a seller you probably expected to find a good buyer paying with cash. Due to the subprime meltdown, it’s now much harder to get a loan approved than it was just a year or two ago. Lenders have gotten much stricter with their requirements. Sometimes it works out that way and sometimes it doesn’t. However, certain homeowners could be missing out on a beneficial opportunity. If you are a seller who has a large amount of equity built up in the home, you would be able to take advantage of this beneficial opportunity by owner financing the sale of your home.
There are two major benefits to owner financing the home you are selling and of course there is a certain amount of risk involved, but the benefits might out weigh the risks in your situation. A buyer might be willing to pay a higher price for your home at a higher interest rate if you are willing to help him or her by owner financing the home. These people may for some reason not be credit worthy to get a conventional loan. Herein lies the risk; there is the possibility they may default on the loan.
Seller with a large equity can get a higher interest rate by offering a mortgage to the buyer than the interest the owner would receive if the money were placed in a bank account. This method of investing their money appeals to some of the older seller because they may be thinking of their retirement days not far ahead. Unfortunately, there are those who are vulnerable when the buyer defaults on his payments.
When offering owner financing to a buyer, the seller will be giving the buyer either a first mortgage or a second mortgage. The second mortgage being a greater risk it comes with a higher interest rate than the first mortgage. The challenges facing the seller would be to qualify the buyer to ensure their 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 the transaction details should you ever need them. Protecting you from the loss of all or part of the equity invested to create this financing, in the event buyer defaults on the loan.
Qualifying the buyer might be easier than you might think. The buyer can easily get his credit scores from the credit reporting agencies and show them to you. Drawing up the documents needed to create this mortgage can be accomplished with the assistance of some online services. It is recommended you have an attorney look over the document to ensure you are protected and everything is legal and above board.
It is common knowledge some buyers will default on their payments. Foreclosure would be the next plausible step, but it can be difficult and a costly procedure. This is one of the reason owners shy away from financing their own homes.
Knowing the risks involved with owner financing it is still a lucrative way to invest the equity of your home. 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.Immobilienmakler Heidelberg Makler Heidelberg