There are several ways in which you can sell your house. You can list your home on the market and evaluate the offers of the potential buyers. You can also sell with an investment company where you get a fair cash offer, or think about owner financing to sell your real estate to a home buyer and collect the payments within a specified period.
Owner financing occurs when a home seller loans a home buyer the necessary money to purchase the property of the seller. In a transaction of seller financing, the seller of the home finances the sale of his real estate, and by doing this, he typically takes the place of traditional lenders such as credit unions and banks. In this case, instead of the buyer making monthly mortgage payments to a lending institution, he makes the payments to the property seller. Seller financing is a quite valuable, but it’s not a popular strategy of selling your home. The following are six tips for sellers who opt for owner financing.
Owner Financing Tip 1: Set The Terms
The terms of the contract are very crucial, yet they are the most overlooked parts of the contract. The terms may include the down payment, payment amount, loan interest, the frequency of the payments, the due date for the full payment and also penalties for late payments. Depending on the agreement between the buyer and the seller, it’s important to set terms that are affordable to the buyer and also favorable to the investor.
Owner Financing Tip 2: Protect Yourself
Despite entering into a contract with a trustworthy person, things can always go wrong, so it’s important to protect yourself. Ensure that you have insurance and the other party as well in case of any misfortunes that could occur. You can also consider adding a clause that maintains the home ownership in your name until the property is fully paid.
Owner Financing Tip 3: Get The Help Of An Attorney
No matter the terms and structure of your owner financing agreement, ensure that you seek the help of a lawyer each step of the way. A well-qualified attorney who is familiar with your local laws can help you prepare the closing documents since a poorly drafted agreement may end up hurting you in the long run.
Owner Financing Tip 4: Build Contingencies
Most of the sellers financing contracts are built solely around what would happen in case everything goes as planned. However, things can happen beyond our control, so incorporating unforeseen events will enable you to make better decisions in the case of any eventualities. You should assent on the contingencies with the buyer at the very beginning, and this will make the agreement much smoother.
Owner Financing Tip 5: Your Timeline
Consider the duration of time within which you would like to be paid. Lending institutions offer mortgages ranging between 5 to 25 years. Are you willing to accept payments within such duration? Your buyer might also want a timeline that will work for them too.
Owner Financing Tip 6: Don’t Focus On The Price Only
The price of the property is just one factor among many others. In fact, you will have to come up with a price that will be fair to both of you, but there are other elements to consider as well which can benefit you more than the home price in the long run.