Sadly there are a lot of scams of owner financing, if you want seller finance Please get an attorney.
If you need any help, just let me know.

Victoria Pando, CRS, GRI, CIPS
TX Real Estate Broker
WIZ Realty
Cell 512 696-3015
vickypando@gmail.com

Great Answer Andrew!

I love to hear people on Trulia speak of more creative ways to put deals together. I very much liked your suggestion about having an Attorney red-pen the paperwork as well as the way you described a "wrap-around mortgage" type situation.

Another great point is when you talked about sellers saying that they "need their cash out to pay off their mortgage". Creating, selling, and buying notes is something I'm eventually going to dive into/educate myself on because of the ability to create solutions where most people see a dead end.

Nice Job! And keep up the creative work!

Darin

I am an investor that buys these notes so there a number of directions that this question can go. I will do my best to cover the many ways you could be asking it...

FUNCTIONALITY:
"How does owner financing work in terms of paperwork?"
-Seller financing occurs when a seller of a property carries back the financing for the sale of the property by creating two types of contracts in addition to the sales contract:
-A Debt Instrument. (A Promissory Note)
-And a Security Instrument. (A Mortgage, Deed of Trust, Contract for Deed, Land Sale Contract, or All Inclusive Trust Deed.)

Contrary to popular belief, not all properties with money loaned and liened against them have a mortgage. In fact, most banks hold a Deed of Trust, or what is more commonly referred to as a Trust Deed, because the judicial process of foreclosure is much easier than a mortgage but every state is different so consult an attorney.

WHAT TO DO TO FACILITATE OWNER FINANCING:
"How does owner financing work in terms of the legal proceedings?"

You may just be asking how to get it going, and the best thing to do -if I were you- is just make an offer with agreeable terms (that I'll discuss later) that you then advise an escrow or title company that is processing the transaction to include in the contracts. You can also have an attorney draw up the paperwork. If you need to save on costs you can ask the attorney what contracts are needed (which will vary depending where you live), then you can just buy them from a stationary store or online legal documents website and then have the attorney just review and red pen them, it is A LOT CHEAPER to have an attorney correct a document instead of write the whole thing.

WHAT TERMS NEED TO BE NEGOTIATED:
"How does owner financing work in terms of what do the property seller and buyer negotiate?"

Every seller carry back includes:
-a down payment,
-a credit score of the payer
(and every promissory note includes...)
-number of payments (length of time),
-an interest rate,
-beginning balance,
-A monthly payment amount
-And a future value (fully amortized, or ballooned)

And all of these terms determine whether the promissory note holder can sell and how much they can sell it for.

IMPORTANT THINGS TO KNOW:
"How does owner financing work in terms of conditions needed?"

TAKE NOTE: You do NOT need to own a property "Free And Clear" in order to finance it. You can create an All Inclusive Trust Deed (A.I.T.D.) in which you continue the mortgage payments that the seller paid and make payments to the seller. (this usually results in the seller making a profit between the interest rates if done right)

PROPERTY SELLER CONDITIONS: Most property sellers, when you ask them to finance, will say "No, I want cash" or "I need to pay of a mortgage" but that is NOT a problem. In fact, if you create a GOOD promissory note, they can actually get more than the average cash offer by creating a promissory note (the right way) and turning around and selling it to an investor like myself a month later.

If you have any questions about this topic, I consider myself to be a specialist. Feel free to call me and pick my brain about it, it will most likely result in educating you further and expanding your choice of properties!

If you have any questions please ask.

Regards,
Andrew Distad
Investor
http://www.Cash4PromissoryNotes.com
(760)-296-1573

Good morning,

I am a licensed agent in the Round Rock Keller Williams Realty office. I actually have 4 properties that I have sold with owner financing and I carry the notes. The hardest part of owner financing is finding a home that is owned free and clear so you can actually take tite and deed of trust to the property. The terms are all negotiable, as in any transaction, but usually a hefty down payment and higher interest rate. Some owners will do credit checks but others won't. If you have any specific questions, please feel free to give me a call. 512-635-7592

Hey there Rounders....

Josh did a pretty good job of covering the basics. In Texas, things are done a little bit differently when it comes to selling with owner financing. I'd definitely find a PROFESSIONAL who is VERY experienced with these type deals.

I have a friend who does Lease to own houses in Texas as well. You may want to pop by his website or mine (((***shameless plug***))) just to get a little more information or to possibly contact him. http://www.leasingtobuy.com

Another great resource is Bob Bruss. I would "Google" his name along with rent to own/owner financing. He was a wonderful national real estate columinst who tried to teach people about different things partaining to real estate. He has a great article on Lease Options.

The great thing about Owner financing is that every deal/situation is different. There is no one specific way to do them. As long as it's written in the paperwork/everyone understands/terms are fair, then these deals can be great for sellers AND buyers. Who needs a bank anyway! If you can find a seller who will sell you the house and create the note himself, you're golden! Of course his terms are going to be slightly different than a typical lenders.

It comes down to this: It's either cash or terms when buying & selling. If you have cash, you don't need really great terms. If you have NO cash, you'll have to search for and pay for better terms to get what you want.

Hope your search goes well!

Darin

Hello,
There are literally hundreds of ways to go about Owner Finance, and it truly is
a negotiable transaction.

BUT...

Most of them go down something like this, in my experience.

substantial downpayment (usually 5-10%)
Slightly higher interest rate (in the 7.5-9.9% range)
2-5 year balloon payment (meaning you would need to refinance at this time).

There are several other factors to consider such as who gets the title, deed of
trust, etc. but again, these things are negotiable.

Owner financing does not involve credit checks. In essence, your downpayment
is your credit check, because if you default, the seller keeps that money, forecloses
on you or evicts (depending on the contract terms) and sells the house again.

The upside to all that? Your credit score doesn't matter or come into play. Although
it sounds slighted toward the seller (and it is, kind of), it is a fairly secure transaction
that is drafted and overseen by an attorney.

If you don't think that you will qualify for a loan, Owner Finance is certainly a viable
alternative, but you will definitely need to bring some cash to the table.

Let me know when you are ready to discuss this further, so we can move forward.

The terms for owner financing would be whatever the buyer and the owner negotiate. In general, you might expect the terms to be similar to what you would get from a bank. Like a bank though, a lower credit score means a riskier loan and thus a larger down payment or a higher interest rate would be expected.

Contact me if you have any questions.

Thanks
Walter Rock
http://www.roundrockrealty.com/index.php?action=view_user&am…