Are you considering selling your home with owner financing? Generally, when you are offering owner financing as a means of purchase for your home, you can commend top dollar and a great interest rate. Here are six techniques you can use to lower your risk.
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1. Collect a large cash down payment of at least 10%.
2. Ask for additional collateral. If the buyer does not have the required down payment and you feel comfortable with the transaction, proceed as planned be require additional security in place of the down payment such as a car title.
3. Obtain a credit report. Ask your buyer to provide you a copy of their credit report. They can get one online, sometimes for free. If there are some negative things on their credit report, it may be okay just be sure that to issue has been resolved and they have recovered financially from what caused the problem.
4. Trust your gut. I know it sounds clich but usually your gut instinct is the best instinct. If you do not feel comfortable with the person buying the home, you may need to walk away. Remember you are entering into a long-term relationship with the buyer and you need to be comfortable with the transaction.
5. Consider the whole picture. If the bank is willing to loan the buyer 90% of the homes value, and is okay with you holding a second mortgage on the house if the buyer puts 5% down in cash, it’s a win win for everyone. The whole picture is you’ll be getting 95% of the value up front, even if the buyer never pays a dime on the second mortgage. Worst case scenario is that you foreclose on the house that the buyer paid you 95% of the value for.
6. Speak to a lawyer. The courts in your area may take as long as two years to get a foreclosure on a mortgage, but only six months to foreclose on a contract for sale. Determining all the options up front can help you make a wise decision.
Offering seller financing makes it easier to sell, and to get a higher price. Just be safe about it. Have a real estate lawyer review your paperwork, and use the tips here.
Hubert Miles is the founder of Waterfront Houses USA, an online marketing service that provides Waterfront Homes and Waterfront Homes For Sale in the US and Canada.