Please educate newbie here.
Owner financing is a way to skip getting my own loan from mortgage lender with small down payment, isn’t it?
Am I understanding this right?
If I am right, can I basically offer that to seller/seller’s realdor???
I don’t think a lot of sellers want that kind of deal because most of them want a cash!
so do you guys think that I just keep on making the offer untill some seller take one?
Howdy Rehabbermeg:
You have it correct. Seller finance deals are out there. There is a guy here in Austin that buys property cheap and gets bank financing and then offers it to investors with 10% down and a little higher rate than what he is being charged, It works great for him and the bank and the investor.
You are right in that most sellers want cash especially enough at least to pay the Realtors but some will owner finance at least part of their equity if they are motivated to sell.
another question,
Do I still have to qualify to carry the loan, don’t I?
Howdy Rehabbermeg:
The question needs to be rephrased:
Do I have to qualify for the seller to carry the note?
This depends on the seller. I saw a seller once that is 5 payments behind facing foreclosure. He was advertising everywhere desperate to find a buyer. He had no equity and as a matter of fact he owed more than the house was worth. He was still wanting to pre-qualify a buyer before even telling them the address or anything about the property. He was so tight that he lost the house to foreclosure.
Some sellers will finance without a ss# and credit check but may ask some questions like where you work etc. Some have a friend and will check you out pretty good. There was a lot of fraud in the past and sellers are being more careful that someone does not get the house with the intention of renting it out and never making a payment.
To sum it up you may have to qualify to some extent.
Hey,
I wonder if anybody has tried this? You get an owner to finance then you find somebody to buy his note (and collect a fee). The owner gets his money, you get the house, the other guy gets his note and you get some extra cash. Hmmm.
Peace,
Richard
How bout this for an exit strategy via owner financing. Take this example with a grain of salt as there are many variables and different situations to each deal, but this should get your creative juices flowing. Read below.
A very creative way to move more properties very quickly is using owner financing, also known as seller financing. Essentially a buyer puts down at least 5% of the asking price. The seller then carries back paper known as a note for the remaining balance. That note is then sold at the closing table to an investor for a minimal discount. This is called a simultaneous close. Below is how a deal may work and close. The deal described below is one that I’m closing on right now. I’ve been in touch with alot of FSBO’s and realtors about this idea who are very interested in the system. I think you will like the idea cause its easy!!!
The rate for this particular note that I’m closing on is a 30 year term at 8% interest with no balloon and 5% down, plus the buyer has the ability to re-finance at anytime. There are no points assessed at closing, no junk fees, no PMI, no originations fees, etc. etc. Reason why cause there is no lender nor is there no bank involved in the transaction. You can save your buyer thousands of dollars just in closing costs since there are no origination fees, junk fees, no PMI, etc. The only “points” if you will, that are assessed is the discount of the note. If I help structure the note properly then the discount is usually minimal. This note that I’m closing on is going to sell at the table to a private investor for 92 cents on the dollar. So out of a 125,000 dollar note the noteholder, who is the seller, is going to receive around 114K plust the 5% downpayment. They were more than happy with that offer. So was the buyer cause they got the house they wanted. This is a great way to move property quickly since there is no bank, no lender, and both the buyer and seller are motivated to get the deal done. To go through a bank is usually a 45 day process from start to finish. To create a properly structured note the process could take 14-21 days. What I need from anyone who wants to do a simo close are the following.
1.Sales Price
2.Appraised Value (current appraisal)
3.Description of property (square ft, updates, bedrooms, bathrooms,
acreage, area of town its in)
4.Loan Application FNMA 1003 (Must be filled out as detailed as possible)
5.What’s the downpayment? At least 5% required (10% would be great)
6.What discount will the noteholder take to get the deal done (Hopefully in the 85-95 cents range)
7.Credit Report (Tri-merge report preferred and at least 575 or higher)
8.Interest Rate agreed upon (At least 8% is required, anything over that is superb)
Usually any credit over 575 will get the buyer in that range that I have specified. That will help create a nice note. I’m talking to more and more FSBO’s and realtors about this opportunity. Not alot of people know about this concept and its a great tool to have in your possession to sell more property or to sell FSBO’s. I get excited talking about it cause these deals happen so fast if everyone is on board! Usually it works out that way. The seller wants to sell the house NOW, and the buyer wants to move in right away. Feel free to call me for any other questions that I may answer for you.
Hey,
There ya go!
Peace,
Richard
gordo2417,
are there noteholders you currently work with which you recommend?
Does the FNMA 1003 application require ammendments or just calculations of the financing being provided? Would it make it easier to find an attorney who’s familiar with owner financing?
thanks for the post
AD
Companies such as Sunvest, Boston Note Company, and Pinnacle deal with simultaneous closings. The 1003 does not need ammendments. It does, however, need to be filled out accurately and filled out completely. Otherwise it will cause delays in the due dilligence process. I would suggest getting in touch with RE lawyers and or title companies that know about owner financing. This will help you avoid the headaches if you attempt to put together a deal. Good luck,
Nate
gordo2417, couple of questions for you, please:
- how (and what) did you get paid in this scenario;
- are you a licensee (do you need to be a licensee); and
- how do you find the investors.
thanks
How do I get paid? Two ways. Either the note buyer pays me a flat fee, say 3% or…they give me a wholesale price, I take my fee off that price and present the difference to the noteholder for their net price.
I don’t have a license and nor do I need one in the state of WI. At least to my knowledge anyways.
How to find the investors? Either go to a notebroker who should have contacts or simply google…note investors, or note buyers, or sell a mortgage, etc. There are many out there for sure. Hope this helps,
Nate
Would this work on a house that is sold at higher then appraisal but in a fast appreciating area? (Orlando)
I have a home appraised at 295k, but comps are in 314k range but only much smaller homes in neighborhood have recently sold. Want to sell owner finance at 311k, and interested in the sim close. Please advice?
The sales price can not exceed the appraised value.
Thanks
Well if all goes well maybe I could sell the note in 4-6 months after close and would be at appraised value then.
appreciate the info