Selling your house using owner financing? Make sure you read this blog post to learn the 6 owner financing tips for sellers in San Antonio Area …
There are many ways to sell your house. You could list it on the market and see what sellers will pay. You could work with a real estate buying company (like what we do here at Vermeer Investment, LLC) and get a fair all-cash offer, or you can consider owner financing and “be the bank” to sell your house to a buyer and collect payments over time.
Owner financing is a valuable but under-used strategy to sell your house. It’s where you offer terms to the buyer to pay you regular payments (just like a mortgage). Here are 6 owner financing tips for sellers in San Antonio Area …
Tip #1: Don’t Focus Only On Price
Price is just one component. Of course, you’ll want to find a price that is fair for both of you but there are other considerations as well (which could benefit you more than the asking price). A lower price with a bigger down payment & higher interest rate may be better?
Owner Financing Tip #2: Timeline
Think about the timeline you want to be paid in. Banks might offer 5, 10, 15, 20, and 25-year mortgages. Do you want to accept payments over that period of time? Your buyer will want to find a timeline that works for them, too: they might not want to be paying you 25 years down the road! Perhaps a balloon after 10 years?
Tip #3: Terms
The terms of the deal are one of the most important yet most overlooked parts of the deal. The terms might include things like how much down payment you want if there’s an early repayment penalty or a late payment penalty, and most important – how much interest you charge. Down payment, interest rate, price, # of years all are important.
Owner Financing Tip #4: Protect Yourself
Even if you enter into an agreement with someone who is completely trustworthy, things could still go wrong – so make sure you protect yourself. For example, make sure you require the buyer to carry home insurance and agree to have the loan serviced by a service company. Always maintain 1st lien, just in case. Never do a 2nd position loan. Agree to a loan that a note buyer would want to buy.
Tip #5: Build Contingencies
Most of your owner financing agreement will be built around the “ideal plan” – of what would happen if everything goes perfectly. But sometimes things happen outside of our control, so building contingencies allow you to make better decisions if the unexpected happens. For example, what if the buyer no longer wants the house, or can longer pay, or wants to pay early, or wants to use the house in a different way than expected? Or what if your circumstances change and you no longer want to sell or you need to sell even faster? Agree to the contingencies with your buyer ahead of time and the arrangement will be so much smoother.
Owner Financing Tip #6: Get An Attorney
No matter how you ultimately structure your owner financing deal, make sure you work closely with an attorney who can help you. A poorly worded agreement could end up hurting you; an attorney can help with writing up the agreement and closing the sale.