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9/22/2017 12:11:25 AM
Posted: 9/1/2005 6:30:19 AM EDT
I own a home free and clear, and if I sell it I was considering carrying the mortgage.

Anyone ever done this? I figure it could net me some serious $$ over 30 years in interest.

However, what are the potential pitfalls, etc.?

What steps would I need to take to set this up? I assume a lawyer would be absolutely essential to arrange this.

Link Posted: 9/1/2005 6:42:21 AM EDT
Several things you want to think of.

The newlender will hold this against you, you will not be able to claim 100% of the income on the home. If the buyer defaults, it is up to you to get them to redeem, or evict. Check with a Realtor in FL, I know about 10 of them there, and they can tell you what the right of redemption period is if they default.

Last month about 2.4% of all loans written 6 Months prior are in default today.

There are several deeper things you'll need to know, legally..You'll be taxed on the earnings as well. If the buyer doesn't pay the property taxes, you may loose the property.

Link Posted: 9/1/2005 6:48:11 AM EDT
I've helped-out several relatives and customers that have done just that. It worked-out very well for all of them. Because you can be very flexible with who you sale to, it makes it much easier to sale your house at your price. Also, people that have credit too bad to get a loan from a bank (which seems to be 90% of the people I deal with on a daily basis), will pay much more for a house since they don't have much choice. Paying a little more than a house is worth is better than paying rent in their minds. Also, you can point-out that you're saving them on closing costs with a bank.

Another angle my boss's son takes is that he finds friends that have expensive cars and boats that while they have good credit, they can't get an additional loan for a house from a bank. He's financed about a dozen houses so far for his overextended friends.

As an example, my nephew owns about 150 houses in local mill villages. He paid about $12k average for each of them. The houses are probably worth $40k now, but for the ones he's financing, he's getting close to $60k. At 10% interest for 30 years, payments are $525 per month which isn't that much more than they would pay to rent a house so even though the price is higher than it would be to someone with good credit, it's still a better deal for them than renting. Several of the buyers have defaulted, so he's temporarily lost a little on a few and had to go through a hassle to foreclose, but he's coming-out good in the end.

I assume a lawyer would be absolutely essential to arrange this.

If FLA is anything like SC, then you are required to pay a lawyer to do this. The law is written to guarantee lawyers a lot of business.z
Link Posted: 9/1/2005 6:51:04 AM EDT

If the buyer doesn't pay the property taxes, you may loose the property

What would make the property not tight? Sorry, I couldn't resist.

You always have the option of paying property taxes and insurance yourself then including it in their payment. This is very commonly done.z
Link Posted: 9/1/2005 7:13:17 AM EDT
[Last Edit: 9/1/2005 7:15:22 AM EDT by stub]
Don't even think about it. I sold a rental house on contract to a couple I'd rented to for a few years who always paid. I lost interest in rentals and wanted out. They paid good for a couple years. I got divoreced. I had to pay my wife $10K for the equity in the house (which I owned before we were married). They quit paying. In my state, the law says if they haven't paid 20% of the sale price yet, I can kick them out and they loose their equity. They were a few hundred $ below that level. Great. I went to a lawyer to make it happen and she says "well, since they are close to being above 20%, the judge will give it to them. You'll have to foreclose". So I foreclosed. A few months later, they filed bankruptcy and will not relinquish the house. Meanwhile, they took off, leaving the house, yard, and garage full of trash, ripped out the fixtures, furnace, etc,etc. . The city condemed the house. I had to clean up the yard and keep the grass cut just to keep the city off my back. There are back taxes and sewer bills owed. It could take months/years and thousands of $ to resolve the foreclosure/bankrupcy. I haven't had any income from it for 2 years. I can't sell it. I can't fix it up and rent it. I can't do nothing but bend over and TIUTA.

The law is not on your side. They protect the scumbag deadbeats instead of taking them out and shooting them in the head.

Good luck
Link Posted: 9/1/2005 7:25:28 AM EDT
Link Posted: 9/1/2005 7:42:39 AM EDT
Thanks for the replies. There are companies out there that will help set this up, handle an escrow, etc. as well.

The person I will be renting the home to ( an ARFCOM member) is considering buying the home in the future. He has very good credit and will easily qualify for a loan, but I was just figuring out if it might be a good investment idea to carry the loan myself and earn the interest. Plus it would save him a lot on closing costs, which would allow him to put a larger down payment down on it.
Link Posted: 9/1/2005 7:58:50 AM EDT
I would not even consider it.

There are very few people that you can trust to send you a check the size of a mortgage payment every month for 30 years.

If they do start missing payments and you have to evict, then your property gets destroyed.

I would let the big mortgage companies handle this, it is their job to deal with these types of headaches.
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