Posted: 11/25/2007 5:06:00 PM EDT
| School me on owner financing. I have a house that would probably not qualify for a conventional loan and have had several calls inquiring about possibly owner financing / land contracts. How exactly does it work. I have the house listed at $32K, I only have $20K in it. How many years, percentage rates, and that kind of stuff do I need to look at to have steady income from it? I initially purchased the house to rent but don't have much time on my hands anymore and would just like to get rid of it. |
They can't get a loan for $32k?  In most states, with a land contract it is easy to repo. Much easier than a foreclosure. Get all you can! I'd try to get about 15% interest if they're not putting much down (make them put something down, there will be upfront expenses that will need to be paid) |
| Banks in WV are still very conservative on loans. They will not give money for nothing and will send inspectors and appraisers to make sure they don't end up with a piece of trash if a loan defults. I paid cash for it knowing up front what I was buying. Plus I figure the kind of people that would want to finance 30 grand aren't exactly loan worthy to a bank and an investor would have cash and wouldn't consider financing. |
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I bought my first house that way. Back in 1981 I put $1800.00 down, payments were $300.00 per month for 48 months,$150.00 of wich went towards the principal of the house, selling price was $26,000. At the end of the contract I had to pay the balance due $17,000.00. I was responsible for all utilities,taxes, insurance,maintenance,repairs ect. just like it was my house as thats the way our contract was written. I also had to pay the realestate lawyer to draw up the contract about $75.00. It worked very well for me as I did'nt have much credit at the time, always paid cash for cars and stuff back then. I had established credit with a new car loan and credit card within the 4 years and had no problem getting a loan from the bank when the contract was up. I really miss that house  |
Check with a lawyer first, in some areas the courts will basically require you to foreclose. The big advantage used to be that you could just evict them if they got behind, which is a lot cheaper than foreclosing, a foreclosure is going to run you -guessing-5 x as much. If you have no other alternative I agree you should get as much as you can up front as there is a good chance there will be trouble down the road, otherwise they would qualify for a mortgage. edit in a land contract the property stays in titled in your name and the people live in it and pay you back for taxes, water, insurance etc. When the land contract is completed yo deed it over to them. Regular owner financing means you title the property in their name and you place a mortgage on the property, just like a bank does. I have clients that have sold a number of properties on land contracts with no problems and one guy who is coming into me for the 2nd time in a year over the same piece of property. I guess you have to be able to judge risks. The guy who does well with them sells them to people he knows or his family knows who have been working the same place for years, have never been evicted and have families. They may have bad credit but if the land contract is around what they would pay for rent they should be able to swing it. |
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Most owners who sell properties on land contract have no intention of ever actually transferring the ownership to the buyers. Land Contract sales are just a way to fool a renter with bad credit into thinking they are doing something better or more constructive than actually are. Land Contract notes are notorious for usuary interest rates (due to high risk), and are extremely easy to foreclose on (relatively speaking...) If you are in no hurry to off load the place and don't mind dealing with the headaches that come from listening to one white trash excuse after another, go for it. It can be a decent income stream if you find the "right buyer." Otherwise, you're just going to end up with a judgement in one hand and a distressed property in the other. |
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| I am amm in the middle of buying 3 acres now and I went to a small bank to get the loan. 52k is what I am getting for 15 years. It has a house trailer on it and it would not qualify for a regular loan. Small banks will work with the buyers more than the larger banks. Is the land in a good location or off the path? |
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Here is some good info I found on land contracts. Land Contract |