I know nothing about your income or how you plan to pay for this but I can guarantee you will not believe how fast two years can go by. I am buying my own place on a zero equity wrap. When we set it up the seller asked if we should set it up to balloon in ten years. That would be this year. Can you imagine shopping for a new loan this year with the way the markets are? Fortunately, I passed on that.

Have I scared you into retaining an attorney yet? Seriously, owner financing is one of those things where if it is worth doing it is worth doing right – even if you can’t “Afford” it.

I hope it works out for you.
Paul

I’m about to put an offer in on a owner financed property. The addendum was going to read as follows….

“Contingent upon owner financing and a clear title. Buyers will pay 10% of purchase price at the closing. Buyers will assume a 7%, interest only loan, for a one year term. The Buyers may extend the interest only loan, for no more than one year. If the buyers exercise this extension, an additional 1% shall be added to the interest only loan.”

What else should I add? Will this cover me?

I know several investors who do not want the details of their real estate transactions in the public records for everyone to see. Instead of recording the deed, note and mortgage, they record a Memorandum of Understanding. This is a document, signed by both the seller(s) and the buyer(s), that states that a contractual agreement exists between the parties. When recorded with the county clerk this clouds the title. In your case it would mean that if the property were sold to someone else or if a new mortgage was placed on it the title company closing the transaction would want documentation from you before they would issue title insurance.

In addition, I would suggest the same attorney that drafts the Agreement prepare proper sale documents and hold them in trust. That would protect your position and help prevent future legal problems.

That said, this is how an experienced investor I know handles things when one of his sales goes sour. When the second payment due date passes without a payment he stops by the house and asks what the problem is. Many times it’s a divorce. In these days it could easily be loss of a job. Usually it is very clear they can no longer afford the house. He points that out and tells the buyers he will refund their entire down payment if they move out by a certain (soon) date. He will advance enough money immediately so they can rent a storage unit for their stuff. If they have damaged the house he subtracts the cost of returning it to the “as sold” condition from the refund. (He normally gets more like 15% down).

To make sure he is back in control of the property he has them give him an option to buy it back from them. That way he can legally sell the house again without being their agent.

It’s a little more complicated that that, but I describe it because he has been able to avoid the expense and ugliness of legal procedures. It gives the buyers some cash for a new start at a time when that is extremely helpful. He gets his property back quickly and can resell it.

Good luck with your sale.