$13,000 down, fin. $39,000 at 5% 7 yrs. Can I deny owner fin if he fails credit check altho attorney has papers ready?

Asked by Ownerfinancerormoron?, Charlotte, NC Tue Apr 17, 2012

Buyer can't get full financing for closing on 4/18/2012. After reading contracts, I don't like what I see to owner finance. I also don't know how to get a credit report since I am not an INC or LLC. Just me. Attorney pushing to close tomorrow but I just offered to consider owner financing yesterday and need more help before deciding. I could use the $10,000 profit but not the $39,000 if he screws up. Home near Murphy, NC is mortgage free. Your advice?

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Re Lawyer, , Pinehurst, NC
Wed Apr 18, 2012
The NC State Bar will not allow an attorney to try to represent both a buyer and seller where owner financing is involved. Be sure you have YOUR attorney. The key to happy owner financing is a 20% down payment.
0 votes
Interesting, since I was asked to sign a contract agreeing that the attorney is representing the seller and the buyer and is not a conflict of interest as long as the interests of both parties are not adverse to each other.

If so, then he can neither represent the buyer or seller and we would need to find our own attorney.

BTW, my realtor called this attorney and set it up for me. Small towns are great!
Flag Wed Apr 18, 2012
Sherri Green, Agent, Charlotte, NC
Tue Apr 17, 2012
Don't worry about telling them you need a couple of more days to think about it, they'll wait. All of the advice given by the other agents is good as far as checking him out as a buyer.

But consider this, $13,000 down is a good amount. First of all, I would ask for a higher interest rate. Even a bank would want more than 5% on such a small amount for such a short term. 6 or 6.5 sounds better.

If he defaults, you get the property back! I know it would be a nuisance, and cost a little in attorney fees, but financially, your best case scenairo is if he pays a year or two ( monthly payment X months paid+ $13,000) and then he quits paying and you foreclose. You keep all that money, plus get the property back to sell again!

I just closed a deal for buyers who paid 6.5% for 25 years and were happy to do it. The seller had sold the same property in 2001, collecting a $25,000 downpayment, and 9 years of payments at $1,100 per month. The buyers quit paying and he foreclosed and sold to my clients for $140,000, with $28,000 down. He made $143,000 over the 9 years. He owed back taxes that they hadn't paid, but even with that and attorney fees for foreclosing, he cleared over $130,000. AND he got to sell the house again.

Just know that if you are willing to finance, you can ask for more in price and/or interest rate. Make sure that they keep insurance ( you should be on the policy as the mortgagee) and check to make sure they are paying taxes every year. If they aren't..foreclose!
0 votes
Thanks, Sherri, for your advice. I don't understand the laws or contracts so I am not going to owner finance. The contracts seem to favor the buyer, not me, the seller. Why did this lawyer make himself trustee in the Deed of Trust between me and the buyer? It also states I have to pay him, the attorney, should someone sue over the contract. He said the buyer would receive the deed although he would be making payments to me. Is this really NC law ? He called it a "purchase money deed of trust." I don't like the contracts and I am curious if I am being taken advantage of. Who gives a deed to someone before they pay off the loan???? The buyer can't get financing but the attorney is rushing me to close today even tho I don't understand what I'm signing. I'm done. I'm not smart enough to protect my investment so I'll hang onto it until a real buyer comes along with a trust worthy attorney. I wish I were smarter about real estate.
Flag Tue Apr 17, 2012
dave, Agent, Charlotte, NC
Tue Apr 17, 2012
First, I would not let the attorney push you into a contract ro an agreement that you are not 100% comfortable with. The attorney was probably hired by the buyer anyway so you may want to get your own attorney to draw up papers for the owner financing if that is the wya you decide to go.

Second, you can get a copy of the credit report. landlords do it all the time. it costs around $25.00 to $30.00. generally though i would ask the buyer to go to freecreditreport.com and furnish you with a copy of all three bureaus. You could ask for scores but you really want to knwo what hsi pay history si like and why he got denied from the bank for financing.

Third, check to see what he makes a year. How long has he been at his job. Those are good indicators fo whether he will have the ability to pay. also, if the ratio of debt to his income is to high (a reaon a bank will nto finance him) you may want to walk away.

But, do NOT sign anything unless you are 100% comfortable with it....You are not obligated to sign the owner financing agreement unless you have a binding agreemetn saying you are doing this. And it does not sound like you do.

Dave diCecco
0 votes
Hey Dave, I have yet to see a credit report from the buyer but the attorney is pushing to close today. The same attorney is representing us both but seems to be favoring the buyer. I asked my realtor to get a credit report for me since she said I couldn't request one as an individual. The original contract was for full purchase price. I only offered owner financing as an option until I could check out specifics but the attorney told me he changed the purchase contract from VA providing financing to me. I hope this doesn't lock me into providing financing without approving the buyer's ability to pay. I think my lack of knowledge is costing me money. I know the buyer has bad credit but not how bad. I decided not to owner finance since the attorney couldn't protect me financially in the contracts the way I requested before I'd approve owner financing. I just saw the new contracts this afternoon and they stink. I am not deeding my property to a buyer who still owes me $39,000.
Flag Tue Apr 17, 2012
Jim Allen, Agent, Charlotte, NC
Tue Apr 17, 2012
You can get a credit report. Its for a landlord who needs to check out a tennant. Look in the yellow pages for Greensboro or have the buyer furnish you with a credit report obtained at a bank or any place that has access to credit reports.

You can say no JOSE until you are confortable..... but look at a credit report unless you have an agreement to do otherwise

Good Luck
0 votes
Thanks James. When I asked my attorney if I should request a credit report before agreeing to owner finance, he said it was up to me.

He must have bad credit if he can't get a loan otherwise. I should have gotten my own attorney but my realtor lined this up. The same attorney is representing us both and not representing me well at all. I won't be owner financing and I feel much better about the decision.

I think I am being misled.
Flag Tue Apr 17, 2012
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