The dream of home ownership has faded for many buyers who had lost jobs or income, and saw their credit affected. Many who have achieved a job again and stabilize their finances are unable to buy because the loan criteria are more stringent than before.
On the other hand there are many sellers who could not sell their homes because they offer a very low price for it or do not qualify concerned. When one of these conditions occurs is that many speak of owner financing as an alternative.
These contracts, which can be as tailored, have to comply with the rules of the place where the house is. Although this is a matter for which I totally recommend that you consult a lawyer specializing in real estate, I mention some generalities to be taken into account by both parties if they are thinking about it.
If you are a seller
- If you have mortgage on the property, make sure that you are permitted to make any transaction before paying them. In many cases this cannot.
- Orient yourself on your tax responsibilities. For this refer to your accountant or a specialist in the subject.
- Find out about the obligations you have to keep as owner, if any.
- Make sure everyone in the title of the property, i.e. they are also owners agree to the sale.
If you are a buyer
- Calls for an appraisal and an inspection. These are not mandatory for the sale, contrary to when the loan is made, but you will get peace of mind and security that you are getting a good deal.
- You will find much simpler requirements and some owners do not require credit qualification, although if you ask the credit report to know what has been your employer payments and your actual financial situation.
- The process can be done very quickly and expenses you’ll soon besides, are minimal. You save most closing costs, including loan origination, as there is no funding.
- You must be clear that the prompt payment will be higher than in a regular loan, sometimes up to 30 percent. Also the interest rate is usually higher.
- Make sure you’re doing the transaction with the actual owner of the property and is not in danger of foreclosure.
Before the transaction you must be clear
- The type of contract and what will happen to the title. If you become the seller’s name until the house is settled or goes to the buyer. If a contract includes option to rent until the sale is made, or if one of sale.
- The total price of housing.
- Number of prompt payment.
- The way in which payments will be made if monthly or annual payments or be global one at a time.
- Amount of interest and whether it is fixed or variable.
- Who will be responsible for maintaining the property (usually the buyer).
- The penalties and consequences of not complying with the contract. What if the buyer does not pay as well as the obligation not to sell owner to another person, or do other transactions with the house as another mortgage.
- What if the owner or buyers die before completing the full payment?
- The buyer’s obligation is to leave the house free of encumbrances.
- This article is informational and not intended as legal advice.