Owner Financing: Good Or Bad Idea?
If a buyer is willing to buy the house, but cannot obtain a mortgage high enough to purchase the house, then what should you do?
Example: House is being sold for $400,000. If buyer is only able to get a loan for $300,000, then the seller can finance the rest at 9 or 10 %. If this deal is agreed upon, then how would you work out the deed or transfer of ownership? What is the buyer defaults on your loan? Do you have the right to evict him? Or would you have to foreclose on him? How do you go about trying to take the property back?
If you are going to be involved in owner financing, from either side of the transaction, (as seller or buyer), for your own protection, it is best to use what ever 3d party entity, (LSC, Attorney, Title Co., etc) to handle the job for you. That way, all of the paperwork is the way its supposed to be in your state. There will be payment schedules, tax statements etc that need to be done for tax purposes and who knows what else needs to be done. If the person stops making payments on the second, you cannot evict them, you must follow the established procedures for your state for foreclosure. This is not something you should want to do, or try to do by yourself. There are professionals that do this for a living, let them do their job. You're the investor, they're the finance folks, use them.