This type of financing should be a buyer and sellers last resort to use as a means to either purchase or sell a home. There are a lot of questions both sides to a owner-finance transaction, that is to say both the buyer and Seller should be well informed before entering in to these types of private note commitments, and should understand clearly. .
This is an simple way to do a fast transaction and works depending on the situation. It is a sweet deal any way you look at it, as it can actually bennefit both parties depending on the circumstances. Working with an experienced real estate agent , and attorney does certainly help , that is one that actually has participated in these type of notes, the circumstances should warrant the use of them, however, can be dangerous and scarey if not handled properly by realtors, owners, buyers, and yes even unfamiliar attorneys.
More importantly working with a real estate attorney , and well known title company,who understands these types of nonconventional private notes, and the creative financing that may be involved.
I believe what is the most important to note is that all parties in the transaction (including lenders, if there happens to be one) must be fully informed.
This makes for a smoother transion to this type of transaction.
Good Luck,
Geneva, a San Antonio realtor.

Tom,

If you are reaching out to owner financing as the last alternative to actually selling the home; than you certainly need a more experienced Realtor on your side consulting with you all the options and helping you weigh the costs and benefits.

Seller financing is not very difficult at all. Especially if you own the home w/out liens (deed of trust is a lien). If you are currently still financed on the property; the best best according to my real estate attorney whom I consult with is a "subject-to". These "lease to own" garbage contract are now being found to leave the sellers wide open for all types of risks; so they are something I would not touch w/ a ten foot pole, but if you don't care; be my guest.

Truth is, find a real estate attorney that truly understands non-conventional financing and actually practices it numerous times themselves. Believe it or not, these lenders are allowing more and more of these "subject-to" deals to happen with them being warned and notified up front; so don't let someone fool you into thinking "well, just keep it a secret from the bank"... hmm... if I heard those words I would probably run!

Best of luck on your endeavors.

Josh

Many of these types of contracts ended up in a disaster property owner, and tenant don't understand terms agreed to .

Never enter into this type of agreement unless you have an attorney or Realtor who represent both parties, some end up on lawsuits

Have you conside leasing property if tenant wants purchase 1st right of refusal?

Explore all options make sure you understand what you have signed.

Many lenders if discovered can call your mortgage for full payment review your lender agreement

National Featured Realtor and Consultant, Texas Mortgage Loan Officer, Credit Repair Lecturer
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Lynn911

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Unless you own the property outright with no mortgage than in Texas it is unlikely you can realistically owner finance. If you have current financing, then you can't give the buyer the deed. That means you would be selling the home "contract for deed" which is nearly impossible in Texas. There are two issues with this. One is the acceleration clause in your current mortgage. You will need to read this and understand it and have your attorney go over it with you. This clause normally means the note repayment is accelerated when there is a change in ownership of the property. Typically your current mortgage will require that the home be owner occupied....so these are the tough parts. Contract for deed laws are also now very tough for sellers to comply with and have severe penalties for sellers failing to follow these laws.

If you are having trouble selling...there are several other options that are probably more viable.
1. Lower the price.
2. Improve the condition.
3. Improve access.
4. Ask lender for the potential of a short sale.

Discuss these options with your realtor and ask them to be brutally honest with you.

Good luck.

Hi, Tom,

Homes that are rejected by the market, and it sounds like yours has been, usually don't sell for three reasons:

1. They are over-priced. The market views pricing as it is, not as we want it to be. We who make our living in the Marketplace don't make the market, but we must understand it. If you price your home too high, two bad things happen to you.

a. The people who can afford to buy your home never see it, They don't search higher that their price range, and,

b. The folks who do see your home compare it to others that are correctly priced. You are helping others to sell their homes. Their agents tell them, "If you like that one at $190K, you're going to love this one at $185K.".

If the reason you are over priced is that you can't afford to sell it @ market price and pay closing costs and commissions, you might need to explore a Short Sale. That's where the Lender agrees to take less than the full amount owed as full settlement at closing. You don't get anything, but you are free of the home. It's time and paper intensive, so you will need a Short Sale certified (CDRS) REALTOR®.

2. They are not in top condition. Today's Buyers (usually FHA loans with 3.5% down and Closing Cost assistance from the Seller) just don't have any money left over to make repairs or remodel. If your home isn't sparkling clean, move-in ready, in top condition (and professionally staged) , forget about it. See our blog at http://www.trulia.com/blog/ellen_doc_stephens_realtors/ for a full discussion of this.

3. Some homes are just not properly exposed to the market. 85%+ of today's Buyers start here on the Internet. They call us and ask to see a particular home. They usually already know the details. Do a Google Search on "your address" in quotes, and you can see if it is out there. There's much more to selling a home these days than the 3 P's - Plant the Sign, Post in MLS, and Pray that someone will bring a Buyer. Professional REALTORS know that they must do a full-court press on the web to sell a home today. In addition to the Internet, they also need to prospect intentionally for Buyers for YOUR home.

So, back to Owner Financing: If you go this route, you need to understand that your Buyer probably can't qualify for a loan at today's historic low rates from a real lender. So you need to do three things:

1. Get a large down payment, and charge a higher interest rate. If you have to take it back (and you probably will), you'll be able to afford to recondition it for sale again.

2. Understand emotionally that the Buyer won't be maintaining it to your standard. You may prefer to put in a Renter until the Market improves (whenever that will be), and let them make your payment for you. At least you still have control over the property.

3. Make sure that all the papers are drawn by a local Board-Certified Real Estate attorney. (Call us for a list). No internet forms for this! If you do have to take it back, you will want your interest secure.

We hope this helps. Good Luck!

Owner financing is becoming much more common now due to the number of buyers who are unable to obtain a purchase loan via institutional lenders, usually due to negative credit, debt to income ratios, etc. of the buyer.

If you currently have a mortgage on the home, you should understand upfront that your existing deed of trust will almost certainly have a "Due on Sale" clause which allows your lender to call the mortgage due if you transfer a beneficial interest in the home to another party. It doesn't mean the lender will call the entire mortgage due, but they do have the right to do so. If the lender calls the note due and you can't pay the entire note at that time, they can foreclose on you. You just need to know there are a number of risks to owner financing so don't take it lightly and don't do so without visiting with a real estate attorney.

You will typically want an attorney to draft the legal instruments needed to secure your interest in the property. I wouldn't recommend you use forms you find off any old web site on the web because Texas is very different from other states when it comes to lending laws. You will need to know the terms under which you will sell via owner financing...interest rate, years of note, downpayment requirements, etc. I would would locate a real estate attorney you wish to work with and then wait till you find a buyer before having the documents drafted. The buyer should pay the costs of these documents, but that is negotiable. You will "wrap' this note around your existing note. In other words,

Once all this is done, you can advertise the property as owner financing with the specific terms, conditions, etc. Be aware, if your buyer doesn't pay the note, it doesn't mean you won't need to pay your underlying note or you will ruin your credit and risk foreclosure. Also, you may then have to foreclose on your buyer too.

The above information is not to be construed as legal advice. You should consult legal counsel.

Hello Tom,

If you own your property without a mortgage then the process is very easy. You would contract with your buyer to arrange for a payment schedule through a real estate attorney. I would recommend a decent down payment to protect your interests. You might even want to request a balloon payment within 5 to 10 years so that you could eventually cash out by having the buyer refinance later when they are capable of doing so.

If you still have a mortgage on your property, then it is much more complicated since this would involve getting the approval of your current mortgage company who holds the note on your property.

Definitely having the option available for buyers to accept an owner finance is an advantage in today's market! You are way ahead of the game in your thinking!

Let me know if you have any other questions!

Amanda P. Herring
Realtor-Broker, ABR
(210) 771-8608