Can I Offer Owner Financing?
My situation is a bit complicated but here goes.
Because of business failure in 2003 I had to file bankruptcy. I kept the house but have a 1st and 2nd mortgage. I did not reaffirm but have been making payments but it is a huge burden on me at my current income level.
I am going to sell the house but the market in the neighborhood (upscale neighborhood in a small town) is kind of slow.
Combined 1st & 2nd mortgages total around $221000 and a realtor told me house would sell between $230000 and $240000.
My question is this: Can I offer some sort of owner finance with my bankruptcy situation to help sell the house?
You most certainly can. Up your interest rate on your mortgage 2% and get a large downpayment from the buyer. You have your downpayment upfront plus the margin on your loan every month until your buyer refinances and cashes you out. In addition you should be able to get top dollar for the house. You may however be better off lease optioning the propertyto a prospective buyer in case they stop paying it is much easier to get the buyer out.
Best of luck,
Andrew
did you file 13 or 7. if you filled b/k you can offer owner fin. if you filed reorganization {where you pay only a % of your debt} you would need the approval of the trustee....km
Quote:
On 2004-08-23 14:39, kenmax wrote:
did you file 13 or 7. if you filled b/k you can offer owner fin. if you filed reorganization {where you pay only a % of your debt} you would need the approval of the trustee....km
I filed chapter 7.
Since I'm new at this your advice or input is greatly appreciated. Here's what I'm thinking about offering on my house:
$250000 (negotiable) 15% down, 8.5% interest for 25 years.
Would this be a wrap-around mortgage that I'm getting from the buyer? Should I set up an escrow account to handle payments from the buyer?
If I decide to sell the mortgage down the road, what kind of percentage can I expect to get for it?
Thanks in advance...
My question is why would anyone pay 2% more than the market through owner financing? Are you going to attract buyers who cannot get conventional mortgage and there is a higher risk? Does the loan amount to a private owner not show up in credit report and thus not be a factor in getting another loan for the buyer?
Quote:
On 2004-08-25 09:07, ahmedmu wrote:
My question is why would anyone pay 2% more than the market through owner financing? Are you going to attract buyers who cannot get conventional mortgage and there is a higher risk? Does the loan amount to a private owner not show up in credit report and thus not be a factor in getting another loan for the buyer?
Adding 2% was a suggestion from someone more experienced than me. It would attract more buyers and of course they could refinance at a later date after getting into the house easily.
Quote:
On 2004-08-25 08:39, gbutler wrote:
Since I'm new at this your advice or input is greatly appreciated. Here's what I'm thinking about offering on my house:
$250000 (negotiable) 15% down, 8.5% interest for 25 years.
Would this be a wrap-around mortgage that I'm getting from the buyer? Should I set up an escrow account to handle payments from the buyer?
If I decide to sell the mortgage down the road, what kind of percentage can I expect to get for it?
Thanks in advance...
By doing this, you are creating a note between you and your buyer. You would then use the monthly from your buyer to pay your mortgage.
Yes, there are loan servicing companies that will collect the money from your buyer and make your payments for you, as directed by you. They can also handle late payment warnings and notifications to you that they are late. It would be good to find one that can set up some kind of "trust account' where you can park extra cash to make payments in case your buyers are late and you want the mortgage payment to go out on time. You can also park any extra money there (like the difference between your mortgage payment and the buyer's monthly payment if there is any).
Mortgage note buyers abound (google "note buyers" and you'll find a ton). How much they discount the note they buy will be up to their criteria, usually the note terms and buyer's credit rating.
Andy
You may be able to collect 65% to 85% and sometimes higher on your note depending on the length of term, pay-out due and based on the buyer's credit.
Many do not buy Seconds, Wraps or Flips.
How much is your seller financed mortgage worth? It all depends on several factors:
*The interest rate on your mortgage
*Whether it is current or not
*If it is a first or second mortgage
*The size of the mortgage to the value of the property (Loan to Value)
*The credit report of the borrower
*How many payments you have received (Is the mortgage "aged"
*The type of property
Value Increased
Equity position of 20% or more
1-10 year maturities, or longer term amortization with balloon
Good borrower credit
Seasoned note with satisfactory payment history
Market interest rate for risk involved
Late charge provision in note
Due on sale/right to approve Assumptor clause
Financial statement on borrower
First mortgage or large second mortgage relative to first
Step rates which increase interest rate over time (not usual)
Timber cutting clause on acreage properties
Flood insurance required and maintained if property is in flood zone
Professional note collection by third party
Cross default clause in junior liens (default on first mortgage is grounds to default the second, even if current)
Credit report on borrower available and up to date
Reasonable sized mortgage compared to the property value
Well written and structured note and Deed Release provisions
Title insurance available and no exclusions
Value Decreased
Limited equity/Small down payments
Long term fully amortizing obligations (no balloons)
Bad borrower credit
Unseasoned note or simultaneous closing
Below Market interest rate for risk involved
No late charge provision on the note
No due on sale or Assumption/Approval right
No Financial statement on borrower
Large amount of debt senior to subject debt (on junior liens only)
Fixed rate note
No timber cutting clause on acreage properties
Property in a flood zone without flood insurance
Seller collects own payments
No cross default clause in junior liens (default on first mortgage can mean second is wiped out and holder of second has no right to default the second, if it is current)
No credit report on borrower and no right to pull one
Small size note or contract
Badly written note
No title insurance
Subordination clause that could force the note into lower priority