Owner Financing Questions

General Real Estate Investing
1

I have a house that i have listed with Century 21 for 45,000. To make a long story short, i am not selling the house and am going to rent it out. Anyways, i have a couple that want me to do an owner financing with 15-20k down. My listing agreement with Century 21 doesnt end until March. My question is since nothing is going through Century 21, will i have to pay the realtor fees since i am doing owner financing? if so, is there any way i can get around it?

Next question; since i planned on renting it out, I refinanced it last week, with a $500 prepayment penalty within 3 years payoff(there was no closing costs involved). How do i go about financing them with a loan already in place?

2

Here is my question if they have 20k to put down why would they want to do owner financing on a 45k house?

If they got even a 70% loan put 30% down ($13,500) There are some great loan programs NON CREDIT DRIVEN that would qualify them to buy this house out from you!

As far as the Realtor commission of 3% that is only $1,350.00 offer them half of that to do the contract because you found the buyer anyway!

And say adios to that casa!

3

Howdy Black95GT:

Check your listing agreement. I always keep the right to sell my properties when using a full price agent. You may have that right as well. I would only offer $500 to your agent otherwise. Some even have in the agreement a cancellation fee of a similar amount. They are working to try to help you sell the house and most will do what they can to help.

Actually even better yet let them give you a fee for them walking away. I did it once on a $185K house and it was just the listing agreement paperwork fee in the agreement of $495. LOL

4

yeah, i dont know why they dont want to go through a bank. They are a hispanic couple and ive had the same thing with another hispanic couple. The whole thing was i planned on renting the house out. So this way its like renting the house out but making more money on the deal off my interest. The whole thing of it is, this was a rehab and i only have like 19k invested into it. Although i may have to go through and rehab it again, the thing i hope for is for them to default and i take the house back. Can there be any bad out of this?

5

Howdy Black95GT:

With that much down you are in the drivers seat. Take the cash and do it again. Lease options are almost illegal here in Texas. You may want to give them a deed and they give you a note and deed of trust or a mortgage to secure your financing. Many Hispanics especially in South Texas have been taken advantage of by crooked landlords who sold on a lease option and then repossessed for little reason or defaulted on the underlying mortgage on purpose.

6

If your Century 21 follows the seller service pledge, then you’ll have no trouble cancelling the listing agreement. It is reasonable for the agency to as for a small service fee on a cancellation to pay for past advertising, etc., and as the seller in this situation, I’d give them something whether they asked for it or not.

Owner financing $30K ($15K down) at 9% (HIGH) for 360 month amort, payment is about $250/month.

There are several ways to do forms of owner financing, depending on the situation, and as Ted mentioned, your state’s laws. However, the ways are fewer for trustworthy investors when the buyer is putting down that much.

In fact, only two come to mind. One is to simply sell it to them outright. As Ted said, deed it to them with your state’s version of real estate secured note. Of course, this means that you have to pay off your loan, but if they give you $20K down, that’ll cover it. Two is to do a contract for deed. Using a CFD, as the seller/lender, you are not allowed to have an underlying mortgage greater than the existing balance on the CFD at any time. Would this fit that bill? Of course, several states have outlawed CFDs altogether because of what Ted mentioned about some less than stellar investors were taking the DP’s and running and not paying on the underlying note at all.

The best course of action would probably be to convince them to try to get it financed through a lender, though that may prove difficult as well, because many lenders will not loan less than $50K anymore.

Now, I’m going to have to get on the soapbox for a minute because this comment “the thing i hope for is for them to default and i take the house back” really bothers me.

My goal in RE is to make money. Hey, that’s what we’re all in it for, right? However, I don’t do it preying on those in greater need than I. I do it by working with them to get them the best deal for THEM. Yes, I make money, but only if the property and terms work for the buyer, too. This creates a positive referral system, plus I have no problems sleeping at night (of course, those “less than stellar” investors probably don’t either).

I know that you probably didn’t really mean anything by it, but that comment is right up there with those investors that don’t bother to pay the underlying mortgage or try to find reasons to evict the tenant in a lease, lease/option situation just so they can keep the option fee and find another sucker.

Okay, off the box and back into my little corner.

Raj

7

Howdy Roger:

Great post. I too had a problem with that point of view. It is unfortunate that a lot of CFD deals do in fact work out like that. I did about 30 or 40 of them and only a few have stuck but I only got a few grand as down payment. I hope Black95GT is not going to try to scam his buyer. It is hard to convince some folks they can even get a loan from a bank or mortgage company and will only deal withe sellers.

8

no, i am definitly not trying to scam anybody. Im just saying from my point of view that if they have 15-20k down, that my butt is covered in terms of my investment. I dont actually hope for anybody to default on any investment, but what i was refering to is IF they do, then im not out any money. Now if they put down 2 or 3k, and then defaulted and trashed the house, then im screwed. with the 15 -20k down, then it doesnt matter either way if they finish as we agree, or if i get the house back cuz im covered.

9

I totally see your point C.Y.A. COVER YOUR ASSet!!!

10

now the only problem with them putting that much down is from what i have read when they have paid over 20% towards the house they now have equitable interest so this is something to think about.