ner of securing financing for the purchase if they do not qualify for traditional financing.
TYPES OFOWNER FINANCING Land contract
The buyer is given an equitable title of the property, mean- ing they temporarily own it, as long as they are making the payments. There is usually a down payment and monthly payments. By making regular monthly payments to the seller, the buyer obtains the deed after the final payment. Lease option The seller leases their home to the buyer for a certain time, with an option to purchase the house. With specific terms and conditions, the homeowner agrees to sell the property (with upfront fees) at a specified time in the future. Assumable mortgage This allows the buyer to take the seller’s role on the existing mortgage. FHA, VA, and Conventional Adjustable Rate Mortgage (ARM) loans can be assumable if approved by the bank or lender. The buyer will need to qualify to take over the seller mortgage obligation. ADVANTAGES OF SELLER FINANCING As a seller, owner financing can provide benefits in a real estate transaction. This gives you the ability to sell your home as is , meaning you don’t have to worry about making costly re- pairs that most traditional lenders will require, or worry about an appraisal coming back low. It also allows you to sell to a potential buyer, who cannot qualify for a traditional mortgage. This may help if you are having trouble selling your house. You also get to sell the property and close the deal fast- er since both you and the buyer skip the mortgage pro- cess. In case the buyer defaults on their regular monthly payments, you get to keep the down payment, including any monthly payments made, and you still own the house. The advantage for a buyer is having an alternative man-
DISADVANTAGES OF SELLER FINANCING The buyer may default at any time but choose not to leave the house. You may need to file for eviction, foreclo - sure, or other legal action to have the “buyer” removed. If you don’t take back the property, you also end up paying for repairs and maintenance depending on how well the buyer took care of the property. The rules were basically changed thanks to the Dodd-Frank Wall Street Reform and Consumer Protection Act. This Act was formed in response to the 2008 financial crisis, and contains numerous provisions targeting the government sectors who were believed to be responsible for the crisis. These sectors included banks, mortgage lenders, and credit rating agencies. From an owner-financing perspective, the Act states that balloon payments may not be an option anymore and you might have to involve a mortgage loan originator (third-party institution or individual that works to com- plete the loan transaction). It all depends on the number of properties you provide seller financing. Depending on your financial situation, owner financing can be a good option. If you’re considering selling your property via owner financing, it helps to consult real estate profes - sionals to ensure you are making the right decisions. • Michael Jordan is the founder and President of Strategy Properties in Michigan. Michael started his first company at the age of 19, while still a student-athlete on a full scholarship to play basketball at the University of Detroit Mercy. Following two years of NCAA tournament play, Michael transferred to the University of Michigan to pursue a degree in Business Management. He founded Strategy Properties, Inc. in 2003 (under the name Jordan Ventures, Inc.) with a primary focus on the construction of new homes throughout Wayne County, Michigan. Since then, Strategy Properties has become a key provider of rental homes in Detroit and Southeast Michigan.
thinkrealty . com | 55
Made with FlippingBook Online newsletter