Home Buying in Arkadelphia>Question Details

Mary, Other/Just Looking in Arkadelphia, AR

what do you do when you are just days away from closing and the seller backs out because they will only owner finance for 3 years and want to know?

Asked by Mary, Arkadelphia, AR Sat Nov 7, 2009

how you will pay for it if you cannot get financing after 3 years .we cant't get financing now that i know of because my husband had 2 heart attacks two years ago and last october he had a tumor removed from his brain so we had to file bankruptcy and so now we are having to statr over again and there is no one out there that will give us a chance it doesn't matter that we have always paid our bills on time we still have this stamp on us that says bankruptcy its like having the plague.got any suggestions other than give up

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Mary,

The first thing one ask when they hear someone wants to owner finance is "why" when the rates are so low and down payment requirements are between 3-20% depending on the loan. In order to perform a successful owner finance agreement, one must think “WIN WIN”. Many people do not own their home “Free and clear” which usually is the first problem with getting an acceptance. If the home is vacant, then one must think how to present an offer that is better than a typical renter agreement. Try saving enough money to place as a down payment, a payment term that includes interest, and a term that includes a balloon payment. Sellers do not want to carry the note for 20 or 30 years. An example would be for a $100,000 property, $6,000 down payment, payments figured over 20 years at 5% interest with a 10 year balloon payment. Remember that not every seller is in a situation that can afford to do “owner finance”. Look for vacant homes that have been on the market a long time (over a year) and ask the tough questions to determine if owner finance is a “win” for the seller as much as it is for you. Explain the benefit to the seller like the total interest paid during the 10 years (example above) and how the note would be paid off in 10 years once you are able to obtain a loan traditionally. Be prepared, if you cannot obtain a loan you are now running the risk as all monies paid to the seller will be forfeited if you cannot obtain the loan by the balloon payment (another benefit to the seller). If they home is an estate then you do not need to waste your time as there are many people in play and they all have their own opinions about financing. Simply put, find another home and another seller. If you need professional help, feel free in contacting a REALTOR!
PS. If the seller has the home currently on the market and a good tenant, then it is an uphill battle as they have the “win win” situation.
0 votes Thank Flag Link Thu Apr 12, 2012
Mary,

Many people are in teh same boat you are in. I just helped a client obtain a loan after her bankruptcy two years age. She was able to get approved for an FHA loan. My understanding is that an FHA lender will look at your last two years of credit history even if you have had a bankruptcy in your past. I believe Rural Development loans look at the past three years.

First go to your lender or your local USDA Rural Development office, they will help you understand what you need to do to obtain a loan. Show your Seller your good payment history, let him know you have spoken with a lender about what it will take to get a loan, show him your plan to get there. That may impress him enough to go ahead with the deal. Add a little more money to the down payment, money talks!

If not, ask to rent the house with "First Option" to buy if another buyer may come along. Perhaps he will allow the rent money ,or portion of it, to be taken off the original house price. Get it in writing (speak to an attorney) Continue with your plan to obtain a loan so you can buy the house, or another one, when your ready.

Lastly, if you have a written contract take it to an attorney to see if it can be enforced, although it may be costly.

Let me know if you need more help or advice, and remember that you are not alone, many people are in the same situation right now.
0 votes Thank Flag Link Mon Nov 9, 2009
Lease option to buy?

What did they want to do a balloon at the end of 3 years?
0 votes Thank Flag Link Sat Nov 7, 2009
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