Infotube.net: Homes for Sale - For Sale By Owner (FSBO) - Real Estate Listings

If you are one of millions of homeowners who are struggling to keep your home, please check out Hope Now.  Hope Now is a cooperative effort between HUD-approved counselors, investors and lenders to maximize outreach efforts to homeowners in distress. 

Hope Now is a non-profit organization and also offers  useful links and resources for homeowners. 

You can reach a Hope Now counselor by dialing 1.888.995.HOPE or by visiting the website www.hopenow.com

There are a number of ways to offer seller financing on real estate.    How to structure the offer depends upon whether you own your home free and clear or whether you have a loan or loans against the property.    

Please read previous posts on the pro’s, con’s and risks of seller financing before you decide whether bankrolling your sale is the right step for you.

Instructions for Seller Financing with an outstanding loan:

1. Seller and buyer agree to a purchase price.
2. Seller verifies the outstanding loan balance on the current loan or loans.
3. Seller should pre-qualify the Buyer, as any lender would do. (Have the buyer provide 2 years tax returns, a pay check stub year to date and a copy of their credit score and report)
4. Parties determine how much of the gap exists between the purchase price and the outstanding balance, and how much of that balance the seller is willing to finance.   (For example:   If the agreed upon purchase price is $250,000 and the outstanding loan balance is $150,000, the gap is $100,000.  How much of the $100,000 will be financed 80%, 90%, etc.   The remaining percentage will be paid to the seller as a down payment.)
5. Parties determine the interest rate and length of the loan term for the seller financed portion of the purchase.
6. Parties calculate the monthly payment amount of the seller financing.
7. Hire an attorney or title/excrow officer to draft the paperwork for the “wrap around” loan. 
8. The seller must continue to make the payments on the original loan.
9. The seller should require proof of payment for all insurance premiums and property taxes.

NOTE:   A wraparound mortgage requires that the seller receives a payment from the borrower that covers the original mortgage payment and the payment on the second or seller financed portion.

Wraparound mortgages are illegal in some states or may be forbidden by some lenders.   If wraparounds are not allowed, be warned that the lender can call your note due in full and payable now for violating you original loan terms.  If you do not know the terms of your original loan, please check with your lender.

Instructions for Seller Financing with No Outstanding Loan.

1. Seller and Buyer agree to a Purchase Price for the Property.
2. Seller should pre-qualify the Buyer, as any lender would do. (Have the buyer provide 2 years tax returns, a pay check stub year to date and a copy of their credit score and report).
3. Determine the interest rate and length of the loan.  (Typically, seller financing carries a higher interest rate than the bank would charge due to the risk.  Most seller financed loans are amortized over a 30 year period, but the outstanding loan balance will be due in full in 5 to 7 years.  This is arrangement is called a ballon note or loan.  It provides the buyer time to straighten out a credit problem, accrue job history, etc. which will enable them to refinance at a later date and pay off the balance due to the seller.)
4. Calculate the mortgage payment.   (This can be done on the internet or provided by any lender.   The report will show the interest and principle paid and the remaining balance due the seller.)
5. Hire an attorney to draft the formal agreement, spelling out the sales price, loan amount, rate of interest and terms.   The attorney or title company can also close the transaction.

Note:   Seller should always have proof that property taxes and insurance premiums are being paid by the borrower.  Also, it is a good idea to add a late payment fee to the agreement.  Late fee’s will help keep your payments coming on time.   In the case of loan default, the seller may have to foreclose and take the property back.

Seller or owner financing increases the pool of potential or qualified buyers for most real estate, but it has its own considerations.   If you are interested in exploring owner financing, ask yourself the following questions:

1. Will you need the cash you are loaning to the buyer to purchase your next home?  If so, bank rolling the sale is probably a bad idea.
2. Are you willing to assess the creditworthiness of the borrower?  Banks are experts at loan underwriting and analyzing the sources for loan repayment.  If you aren’t willing to do the work, it’s probably a bad idea.
3. Do you need monthly income?   If so, and you are in a low income tax bracket, you will probably do OK, but remember mortgage interest is taxable income.  If you are in a high tax bracket, you would probably do better investing in tax free muni’s.
4. If the buyer/borrower defaults, can you afford to lose the money?   If the buyer stops making payments and you can not the monthly expenses, it’s probably not a good idea?
5. If the borrower defaults on your loan, are you in the postition to foreclose?  Foreclosure can be a lengthy and costly process.   Do your homework to decide if a “worst case” situation is one you are willing to face if necessary.   If you aren’t in the position to foreclose, loaning the money is a bad idea.

If you aren’t willing or can’t do what every smart lender would do, you are better off waiting for a buyer with his own source of funds.    If you can comply with all the conditions, then and only then, should you consider bank rolling your home sale.

If you have decided to learn more about the option of owner or seller financing, our next topic will cover the steps involved in setting a financing transaction in motion. 

Thank you for visiting the InfoTube Real Estate Blog.

In a difficult housing market, seller or owner financing can broaden your pool of buyers,  attract top dollar sales prices and eliminate the hassles of dealing with mortgage lenders.   Owner or seller financing can also boost your profits with good investment returns on your money and provide possible tax savings.    But, while the benefits of seller financing can be vast, please consider the risks before you jump into the banking business.  

• What is Seller Financing?      Seller financing involves extending credit against the purchase price of a home, either by taking a back second note from the buyer or financing the entire purchase, if the seller owns the property free and clear.   In other words, the seller of the property acts as the banker for all or part of the purchase price.
• What are the Benefits of Owner Financing for Sellers?   People who own their property free and clear can offer attractive financing to qualified buyers to help a home seller faster and provide a better return on their investments.   In addition, owner or seller financed homes sell for a higher price.
• Who Should Offer to Finance All or Part of the Sales Price of Their Home?    Ideal candidates own their homes free and clear, or they have older VA, FHA or otherwise assumable mortgages.   Other ideal situations include vacant properties owned by retiree’s or wealthy sellers; vacant properties that have languished on the market for several months; estate or court ordered sale situations and individuals who desire income in installments for tax purposes.
• What are the Biggest Risks Involved in Seller Financing?  The largest risk is Buyer Default.   If the borrower stops making payments, the seller may be forced to initiate the expensive process of foreclosure.  In the event of a buyer default, the seller could lose even more if housing prices have fallen further since the sale. Other risks include property damage or neglect, which can be costly to repair;  repayment deliquency; lack of cash to purchase something else; theft and property destruction.

Later this week we address the topic “How to Offer Seller Financing and What the Terms Should Be”.

Thank you for visiting infotube.net. 

Today’s news from the housing experts was dismal and some what confusing.
First, lenders reported that loan applications had increased in the past few weeks. Why are the number of applications increasing if property is not selling?
The answer lies in the drying up of the lending spigot. Even prime borrowers are discovering that no funds are available for home loans. The lack of available mortgage money means that potential borrowers are being forced to apply to dozens of lenders when searching for a loan. Thus, the increase in the amount of loan applications.
The second bit of news of interest to home buyers and sellers was issued by the large, publically traded home builders. Home builders reported record losses and they still have a glut of unsold home inventory to dump. They also reported they own a 5 year supply of land for development, so they will not be looking for purchases of land tracts anytime soon.
What does that mean to you? Home builders with deep pockets will slash prices, add incentives and will give away thousands of dollars in upgrades and cash to sell these homes. Small builders will likely face foreclosure and bankruptcy in their effort to match the deals offered by the big boys.
What is going on in your housing market? We would love to hear from you about what you see and hear. Thanks for contributing. We will pass the info along to others that are interested.

News that home foreclosures are rising is not a surprise to those that follow the headlines. New studies estimate that 1.1 million families will lose their home over the next 2 years. The brunt of the pain will be felt by those left homeless, with tax problems and ruined credit, but the after shock will be felt by all of us.
Why? Because lenders are not in the real estate business. They must dump these non-performing assets as soon as possible. As they foreclose and take possession of all this property, they will slash asking prices as an incentive to move the inventory. Translation: Lending requirements will continue to tighten, making borrowing harder for everyone and we will all feel the effects of further downward price pressure.
Who is at the most risk of foreclosure?? Anyone who closed on an Adjustable Rate Mortgage (ARM) in 2004-2006 with a low initial “teaser” rate has a 1-in-3 chance of losing their home. If you got a subprime ARM during that period, with a higher than average interest rate, your chances are at 1-in-8.
Where are the most foreclosures taking place? For the most part, area’s with the highest rate of foreclosure are the same ones who experienced a great deal of speculation and unsustainable price increases.
Here’s a rundown on the metro areas with the highest rate of foreclosure filings:

Stockton, Calif. (1 in 88 households)
Merced, Calif. (1 in 100 households)
Modesto, Calif. (1 in 118 households)
Las Vegas
Riverside-San Bernardino, Calif.
Vallejo-Fairfield, Calif.
Sacramento, Calif.
Denver, Colo.
Detroit, Mich.
Miami, Fla.

An InfoTube customer writes:
Q: “My boyfriend bought a house a few months ago and I agreed to be the co-buyer. We broke up last month and I moved out. He called yesterday to tell me that he had lost his job and that he could not make the payments on the house any longer.
I didn’t want the house in the first place and only agreed to be a co-buyer because we planned to marry. Now that the relationship is over, how do I get my name off the title? I don’t want to pay for something that I never wanted and I don’t live in.
A: First, you are not a co-buyer… you are a home owner. If you are listed on the mortgage, you are legally liable for the payments and the lender will come after you for the money. Also, be aware that your ex’s failure to pay as promised can damage your credit history.
What options do you have now? Put the house up for sale immediately. Make the mortgage payments or the lender will foreclose and your credit will be destroyed. If you can’t afford the mortgage payments, I suggest that you ask the ex to move out and find a renter to help lower the costs until you can sell the home.
Unfortunately, you’ve discovered the primary danger of co-signing on any type of loan, both borrowers are fully liable for repayment. If the ex can’t afford to make the payments, it is you on the hook, whether you wanted the property or not.
If you need more help, please consult a good real estate attorney. In the future, always consult an attorney before signing legally binding documents.