Selling Own Home Subject-to
Although I've been hoping to do some deals where I BUY subject-to existing financing, I never thought I'd find myself in the situation where I had to sell using owner financing...
I'm being forced to relocate within 90 days, and I wasn't prepared to have to sell my primary residence. This house and area have been VERY good to us, financially, but we're 1 year away from closing out a loan without incurring a prepayment penalty.
Question - how much of a down payment can be expected from an owner-financed deal? In order to have a downpayment on the next house, I need to get 10% of the sale price...is that reasonable and, more important, attractive?
Would it be more attractive if the actual sale were a closed-end discounted future price?
I've looked into renting the house or doing a lease option, but that wouldn't solve the downpayment problem on the new one - and I want to at least have the OPTION of using conventional financing for the new primary residence.
Has anyone successfully done this with their own home, and their own name on the mortgage? What were your terms?
I personally would not sell my own property "subject to" simply because you lose the control of the deal as you are giving legal title to the buyer. Much better to sell on a land contract or lease option if you want to maintain control. Better still if you can sell outright, even if you have to take a small discount to do it.
If your motivation for trying to get top dollar is simply a downpayment for another house, you have other options available.
First, if you credit is fair to good and you have a good income level, it should be relatively easy to find 100% financing for an owner occuppied house. 90% vs 100% is not going to be all that different in your monthly.
Second, this is your chance to start your creative investing. Find that motivated seller in the area you're moving to and make a creative offer that requires little to no money down.
Roger
I would recommend selling on a Contract for Deed. You can sell the property with a large down payment to a buyer who would not qualify for a convential loan. This type of buyer would probably beg you to take his 10% down payment (maybe even more) for the opportunity to pruchase your house. The good thing is, title stays in your name until the buyer refinances, which could be after 1 year so you avoid the prepayment penalty. I would recommend seeking the advice of an attorney so he/she can explain how this works in your state. Good Luck!
A Contract for deed, a Lease-Option, a Wrap-Around Mortgage (least attractive choice) would be the way to go. I question the ability to get 10% down payment in the time remaining. You don't need that much for the acquisition of another residence. But, you can always take less as the date gets to the relocation time line.
Make sure you put a bubble on your buyer's CD at 2-3 years, and get enough each month to cover your own payment on the house you're selling. Charge a premium interest rate and don't apologize for it; if they could get a bank loan they would. If your buyer cannot get a bank refi at two years, renegotiate or repo and sell again at appreciated value. Who knows? Your house could continue to be a good investment even after you sell it!
Thank you guys for the suggestions. I really DO want to avoid that prepayment penalty if at all possible, so I'll start working through my options as soon as I've finished my rummage sale to clear the clutter!
As far as starting creative investing in the new area - I'm trying to recruit a bird dog to scout out property. Unfortunately, I'm not at all familiar with the place, so it's difficult to make informed decisions about where to look. :(
The price you pay for having a "stable" job, right?
you said you were going to relo. in 90. renting or options could be a headache if doing from a distance ......ggod luck........kenmax
Quote:
On 2004-04-08 13:44, mandiland wrote:
Thank you guys for the suggestions. I really DO want to avoid that prepayment penalty if at all possible, so I'll start working through my options as soon as I've finished my rummage sale to clear the clutter!
You did not mention what the prepayment is. It could be best if you pay the penalty and sell on more conventional terms. Assume the prepayment is just a cost and run the numbers to see if you would really be better off. You might find a buyer that wants to go with conventional financing so have then agree to pay a slightly higher price. Most will not but you should be ready to discuss.
John
The prepayment penalty's $6K, and while that's not a ton, it's a hot housing market down here and there's no reason for me to have to pay it.
I've put it up for lease/option now, which has generated some interest and should suit my purposes. The only real piece left of the puzzle is locating a bird dog in the Jacksonville area to help me find a good deal up there!
Thank you again to all for your suggestions.
Just an update on this, because I'm excited and want to get it all out of my head and on paper...but don't want to waste anyone's screenspace with a new thread!
. Just signs and flyers; no newspaper ads.
FINALLY got everything done in order to start marketing the house (clutter cleared, miscellaneous furniture put into storage, etc.), and put the first sign up at about 3:30 p.m. yesterday afternoon ("Financing Available"
Had 10 calls in18 hours, and the second person to see the house offered $4.5K more than I was asking (competitive market down here). Their closing timeframe is the same as ours, and the guy's a mortgage broker - so he's doing traditional financing, and I won't have to do any carryback.
Here are the numbers, for anyone who cares!
$254K - total mortgage balance
$5500 - prepayment penalty
$2100 - partial taxes
$2000 - doc fees and whatnot (traditional for seller to pay here)
= $261.5K total owed
$299.5K - offer price
= $35.9K approx. total profit
sale price = $299.5K + $8985 - 3% seller concessions
The numbers are still a little soft at this point, but I'm still really happy with the outcome. We're walking away from a lot of debt thanks to this house, and the down payment is going to be VERY helpful (in case we do go traditional on our next purchase - but here's hoping I can find a great wholesaler up in Jacksonville, instead!).
Thanks again for everyone's advice on this and related issues, and I'll be sure to keep all the info close at hand for my next purchase and sale.
WOW! 10 calls in 18 hours! That's fantastic!
Maybe I should put some signs out there where you are for my properties in Tempe, AZ and Silver City, NM....y'think I'll get the same reaction? :-D
hmmmmm......maybe not. :-(
I couldn't quite believe it, myself. The market's hot down here, but I didn't realize it was quite THAT hot. It helps that I'm right in the thick of the market.
I'm still somewhat shocked that I didn't have to do any advertising (other than the signs and flyers), and no open house. What a load off my mind - with a 2 year-old, selling your primary residence (keeping it showable!) was a daunting proposition!