Owner financing without signing over or transfering title is called "contract for deed". it is most definitely not advised especially for the person who is waiting on the deed.
Always use an experienced agent and real estate attorney!
I am an agent that does 10-15 Owner Finance Wraps a year. I can tell you that yes you can do a wrap here in Texas but you need to make sure you use a REALTOR that is familiar with them and also close your transaction with a Real Estate Attorney.
I started out as a Real Estate Investor and this is how I purchased and sold homes. As a REALTOR I give me clients my experience and knowledge that I have spent 10's of thousands of dollars in attorney fees to make sure this is done legally. There is a lot to consider when doing this, you do NOT want to do this on your own. Even if you do not use my team, Please use a licensed REALTOR and a Real Estate Attorney that have done at least 20 of these transactions. Make sure they understand they you will need a special insurance policy or you will be committing insurance fraud.
If you have any questions feel free to contact me or my team.
Century 21 Western Realty
(832) 303-0021 http://www.Team-Holcomb.com
Randy's correct. Had he read my prior post he would have realized I already stated your loan terms have a "transfer of beneficial interest" or "due on sale" clause. In fact, I've never seen this provision not be included in a Note or Deed of Trust, but maybe things are different in his area.
But he made my point well. Traditional agents know very little about non-traditional approaches, which is what you're inquiring about here. Each state has different laws regarding owner or other non-traditional financing methods, etc. Since you're in Texas, it would behoove you to get advice from those who work within that legal framework rather than someone who lives and practices real estate a couple thousand miles away. Perhaps in other states a lender will foreclose on a property because someone other than the mortgagor of record is timely paying the note each month, but in 13 years I've never found a single example of this occurring.
I don't have a dog in this hunt Randy. But I do get paid for what I bring to the table.
As you can see there are many things to consider when wanting to do a wrap around owner finance. There have been a few good points made by other people on this post.
First, my team has learned how to successful do these transactions because we actually started out in the business as real estate investors first and this is how we bought houses from sellers. You know those
Read your mortgage. Many mortgages have an escalation clause. Don't listen to anyone who tells you lenders don't care or check, especially if they are the ones trying to get seller financing from you.
With no disrespect to any of the respondents, as you can see there are some differing opinions on this subject. Some will say yes, others will say absolutely not, a few will say only under certain conditions, and some will even say talk to a realtor. I will tell you without any hesitation that the last thing you want to do is talk to a realtor unless that realtor is also an active investor. That means someone who actually buys and sells real estate for his/her own portfolio, not just someone who went to a two day seminar to learn how to be an "investor." Few realtors understand alternative or creative financing methods or how to structure them so you're likely to get some very bad advice from most of them. But, few skilled investors will give you a step by step schematic on this process unless they have something to gain as well. Most investors like myself have spent years of learning and spent thousands of dollars to gain our skills and knowledge. Remember, free advice is often worth just what you paid for it.
I will tell you that wraps and "subject to" assignments are much more common that most agents know...again, because few agents have even a minimal working knowledge of creative financing techniques. And you can "owner finance" if you have a lot of equity, just a little equity, no equity or even if you're slightly upside down in your home. How do I know this? Because I've done it. All it takes is a motivated buyer and a motivated seller.
If you wish to email me directly with your specific situation, I will give you a cursory rundown on the process with a strong caution to not let yourself be fooled into thinking you can go this route alone. A good real estate attorney or a well versed active investor can help, but both will want to be compensated. I structure my deals so I receive compensation from the buyer. And I'm willing to buy homes anywhere in Texas.
I can be reached at Info@FastCash4AustinHomes.com or 512-507-5864 if you wish to discuss this in more detail.
Guy E Gimenez
Broker / Investor
In theory, the answer is yes and Chris Holcumb has given some good information on how that might be accomplished. However, Chris’ solution assumes that you have equity in your house. Do you? Because if you do not, you cannot offer seller financing, you cannot even give the house away except to the bank that holds the mortgage.
You need to meet with a local real estate professional and explore your options. If you are upside down in your house search for a Certified Distressed Property Expert in your area.
If you have equity, why don’t you sell the house outright?
Not sure about where you live, but most areas in Texas have attorneys who are very familiar with and virtually specialize in wraps and assignments of mortgages.
Surely there will be some attorneys who shy away from these alternative financing methods, but nonetheless, these methods are used regularly these days, especially by investors.
Also,if a Realtor believes your situation is too complex for them to advise you then the Realtor will direct you to a real estate attorney.
With the current economy they way it has been and lending rules getting tougher this has become popular again, we do about 10-15 of these transactions a year. There is nothing illegal about these transactions but you will most likely be breaching your contract with your lender since most loans since 1989 now have something called a Due On Sale Clause which states that if you transfer any interest of ownership in the property with out the lenders approval they can accelerate the balance which means they can make you pay the full amount due in the next 90 days. This is an option then lender has and is not something that is done automatically.
The truth of the matter is the lender just wants the money not the house. We have not had one lender exercise their option to accelerate the loan on any of our transactions. The lenders have enough foreclosures right now, believe me they don't want your house, just the money.
That being said we do close all these transactions with a Real Estaate Attorney that is very familiar with the owner finance laws expectially the Wrap Around Owner Finance. There are other things that need to be done like a special insurance policy to make sure your not committing insurance fraud.
These types of transactions can be a true win-win for both the seller and the buyer. If this is something you are interested in feel free to contact me for more information and to see if this is the best option for you.
About 80% of my clients that are wanting to do a short sale on their home end up selling their home with owner finance instead, which fixes their credit and allows them to end up making money on their home instead of walking away with out a penny.
Century 21 Western Realty