Owner financing in the USA
One of the ways I built my portfolio in the USA property market was via owner financing. It is a little different to the Australian way to do it, but here are some great tips to help protect you if you are looking to sell your property via owner financing. It is not always the best way to build a portfolio, but it can be if used correctly.
Blogger: Mark Rooney, Investinus Group
Offering owner financing can help you sell your home or investment property faster for a higher price. Here's how to do it safely.
Why offer owner financing when you sell? A higher price can be negotiated, to start with. Add to that a good return on your money, a faster sale, and an easier sale of a potential "problem property." These are all good reasons, but how do you do it safely?
1. Ask for a larger down payment. This is the most obvious way to be safe, but not always possible. The point of owner financing is to help the buyer get the property, and down payment is one of the area’s most buyers need help. Note what was said here, the buyer is being assisted, (potentially you are helping a buyer), this is important to keep in mind.
2. Ask for other security, where possible. If a buyer wants it with little down, and you like the return you'll get, make it safe by putting a mortgage on other property that the buyer owns. Agree to release the mortgage when they've paid down the balance to a certain level.
3. Credit checks. Ask them to pay for and bring you a credit report. Bad credit might be okay, but the type of bad credit is important. An unpaid hospital bill they're disputing is obviously not as relevant as their unpaid loans.
4. Use your instincts. Are you usually right about people? If so, give some weight to your judgement of your buyer's character. Personally, I'd trust a person who felt morally obliged to pay his debts over a flamboyant person who happens to have decent income at the moment. Not that I this is saying one is better than the other, just simply stated that you are also taking a huge risk, treat the buyer as a bank would, scrutinize, scrutinize and scrutinize.
5. Look at the whole picture. Let's suppose that a bank will loan your buyer 90%, and is okay with you taking back a second mortgage for up to 5%, allowing the buyer to get in with only 5% down. If you're getting 5% more than you expected by accommodating the buyer's needs, where's the potential loss?
6. Talk to a lawyer. In some areas it may take two years to foreclose on a mortgage through the courts, and only six months to foreclose on a "contract for sale." Knowing these things can help you structure the deal in the safest way.
Owner financing makes it easier to sell, and to get a higher price. You just have to be safe about it. Let a real estate lawyer review your paperwork, and if you think these tips here are useful I am sure your lawyer will as well.
About Mark Rooney
Mark first found out about the advantages in the U.S real estate market in February 2002, whilst on a business trip to Canada and the U.S.A. The initial contacts made were able to assist with learning and studying the market place and how an Australian can invest into the U.S market safely and also have assurance that a team there can protect the asset.
For the next 4 years Mark researched the U.S real estate market and looked for opportunities to build further relationships with people. Over the next few years Mark gained an understanding of the various cities and what investment outcomes they provided a foreign investor.
In 2009 Mark was asked to assist others with purchasing property in the U.S.A. This was the initial beginnings of Investinus Group, whose focus is ensuring that their clients have a safe and secure investment in U.S. real estate.
The group aims to build strong relationships with their clients and the people who work with them, suppliers, property managers, attorneys, accountants and developers.
