Selling a House

[yucabird]

Has anyone done a financing-by-owner deal? I have a potential buyer for my house in the States. He has asked about financing, and I am okay with offering it, provided his credit check and work references are solid. What are other ways to ensure someone doesn’t cause headaches down the road?

 

If his record is okay, where do I go from there? What percentage for down payment? How do I decide terms on the remainder? Should I hold onto the title until final payment is made (Is that the norm, or not?)? Any advice would be greatly appreciated!

[milovany]

You'll get a lot of advice here, but you really should talk with a real estate lawyer and have him draw up papers for you. With this big of an investment you're going to want to protect yourself.

 

Doing the financing yourself can be a good thing for both you and the buyer. You will have monthly income, and he will be able to purchase when perhaps he couldn't with a conventional loan. Yes, you get a down payment (which you'll hold I believe until he pays off or refinances with a bank), and typically, the monthly payment is higher than a regular comparable rent payment. You can offer to put some of that extra cost in with the down payment to build the down payment automatically for them (I think that's the idea with the bigger monthly payment). Lots of different variables and options, so do get a hold of a real estate lawyer.

[TranquilMind]

Has anyone done a financing-by-owner deal? I have a potential buyer for my house in the States. He has asked about financing, and I am okay with offering it, provided his credit check and work references are solid. What are other ways to ensure someone doesn’t cause headaches down the road?

 

If his record is okay, where do I go from there? What percentage for down payment? How do I decide terms on the remainder? Should I hold onto the title until final payment is made (Is that the norm, or not?)? Any advice would be greatly appreciated!

 

Don't even think about doing this without a REAL ESTATE attorney handling all of the paperwork. The only way I would consider it is with an option. The Lease and the Option to Buy should be totally separate documents, so that if the person does not abide by the Lease provisions, you can simply evict, rather than also having a purchase tied up in the deal, possibly handing over an equitable interest in the property to the lessee/buyer. After 1 year, or whatever time you determine is appropriate, Lessee must exercise the option and purchase the home, paying you off. You take a HEFTY non-refundable fee for the Option to Purchase, and you apply some determined amount to the downpayment at closing.

 

Anyone with good credit usually doesn't ask to owner-finance the home, because since he has good credit, he can get a 3% interest rate right now. People with bad credit are very, very risky. If they did not pay others, they will have no problem not paying you (excluding the situation of catastrophic medical bills causing former problems, or something like that).

 

It has been my experience that every single potential tenant who asked about buying the house has not been qualified to do so.

 

Investigate deeply. You will need a credit report and to know what funds the person has. Get a real estate attorney involved if you decide to proceed.

[yucabird]

Thank you both!

 

To be honest, I was a bit surprised as the house isn’t even on the market. My former RE agent phoned last week, and said someone phoned about it. I gave permission for him to show the place, and the potential buyer has spoken to me twice since then. He asked about financing, and I said I’d consider it. Then he asked me about terms…and I had absolutely no idea what to tell him. I said I’d give it a bit of thought and get back to him after the weekend.

 

This is the first house I have ever tried to sell, and I have no idea what I am doing. A lawyer would definitely be imperative, if things move further.