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gmakerley · Posted: Tue Apr 07, 2009 1:28 pm Post subject:

your questions are best posed to an attorney who can guide you.

Guest

if the buyer pays for the real estate tax, does he/she get the tax deductions when the income tax is filed?

Posted: Sat Apr 18, 2009 10:39 am Post subject:

Guest

I am signing a contract now me been the buyer, my question is to what happens when the house is paid now how much tax do I have to pay or the taxes on the capital gain of the property.

Guest

Hi all,

It may be wise as a buyer of an owner financed property to include a "first right of refusal" clause into the sales contract for the property. A good real estate lawyer can help you with the wording for this clause and from the sellers stand point it should not be a major issue.
For instance,
1. You purchase a house with 20K down and the owner finances 100K more for you.
2. After 12 months of on time payment the note is considered seasoned by investors who may possibly contact the seller who has owner financed the property for you.
3. At some point if the note holder needs immediate cash (medical emergency, etc...) he/she could get a quote from investors who specialize in purchasing owner financed notes.
4. The note holder will take a % discount for immediate cash depending on the property, com parables in the area, your credit score, etc...

A first right of refusal allows you as the purchaser of the home to match whatever offer is made on the note by an investment firm before the note can be sold. This could give you a substantial discount on the final purchase price of your property!

Alex from California...

If I understand this correctly you just purchased a home and are worried about the Capital gains once it is paid off???
Capital gains would effect you once you sold the home at a profit.

A good real estate lawyer would again help you in this instance. You may be able to lower your capital gains by inserting a clause in the sales contract that specifies the value of the land, house, and personal property separately.

As always each state has it's own set of guidelines and rules regarding what can and cannot be included in a sales contract.

Cheers

gmakerley · Posted: Tue Aug 18, 2009 7:07 am Post subject:

jeff, i don't follow your reasoning on the owner financing question at all. owenr financing entails holding the mortgage on a home that party a has sold to party b, with party a being the holder of the mortgage from that point on. party b is the new owner who then pays said mortgage. now i have to admit i am ignorant concerning the likelihood of an investment firm seeking out a private party who holds a loan note for the purpose of buying that note. perhaps that sort of transaction exists. for the sake of all of our sanity, i'll give you that one.

having said that, however, how would a right of first refusal for our buyer (party b) be relevant. this is not a lease-option we're discussing here, but an outright sale financed by the seller. if party b here had a right of first refusal, what woonce a buyer would that entitle him or her to? is it to purchase the mortgage note that is due and payable from party b? in other words, after having bought the note, party b would then begin to pay party b?

are you addressing a lease-option here or owner-financing? if it's the former, i can see some semblance of reality in your description, but i cannot, for the life of me, see any relevance if you're trying to describe owner-financing.

please fill me (us) in on the details.

Guest

George,

Ok let the attempt to clarify begin.

1. Bill buyer buys a house from Sam Seller. Bill pays 20K down and finances 100K with Sam Seller.

2. Sam Seller carries the financing and records the Deed of Trust with the County Clerk (could be named differently depending on locality).

3. After a year has passed Sam Seller starts to receive solicitations to liquidate his Note (the promissory note from Bill Buyer that is linked to the property).

4. At some point in time during the life cycle of the promissory note (Sam Seller's owner financed loan to Bill Buyer) Sam has a need for cash now instead of future payments and decides to get a quote on selling the promissory note.

5. The remainder to be paid on the note is 80K and Sam Seller is given a quote by Ian Investor for 64K.

If in the original sales contract for the property Bill Buyer has the first right of refusal if Sam Seller ever decides to sell the Note at a discount, Bill Buyer will have to be notified and offered the chance to purchase the remainder of his debt at a discount. In this case Bill Buyer will get a 16K discount.

Admittedly it is an unusual circumstance where this might occur. However, if Sam Seller is going to sell the Note at a discount Bill Buyer should be in a position to take advantage of it if he is able.

Cheers

Guest

Is land owner financing legal? In Texas
What are the most important things to look for in the contract to protect my self.
Thank You J.R.

eric1 · Posted: Wed Oct 07, 2009 4:22 pm Post subject:

Yes it is legal. Hire an attorney to help protect you and draw up the contract.

Guest

i currently have a mortgage through an individual(owner finance), that i have defaulted on, can i try to get conventional mortgage to save home?

jenkin7 · Posted: Wed Oct 21, 2009 11:51 pm Post subject:

Hi guardman,

This query has been discussed on the following page:
http://www.mortgagefit.com/ownerfinancing/conventional-loan.html#12998 0 .

Guest

I am considering purchasing my sister's home on an owner financing basis. My sister has a mortgage on the home which will not be paid off when we take possession of the property. The way we are structuring the agreement is such that we will make monthly payments in the amount of her current monthly mortgage payment. The principal that is paid down (and any market value equity increase through the contract period) will be considered as our "down payment" at such time as I am in a position to take a mortgage in my own name. My questions are 1) is the Contract for Deed technically a mortgage and would this not cause conflict with the current holder of her mortgage? 2) who benefits from the interest deduction for tax purposes? 3) do I have to have a homeowner's insurance policy or a renters policy?

gmakerley · Posted: Wed Nov 18, 2009 9:43 am Post subject:

number 1 is a legal question best posed to an attorney with real estate expertise. i'll give you my opinion, nonetheless. i don't believe that a contract for deed would constitute a mortgage on the property at all - essentially, it's your promise to purchase and her promise to sell the home.

number 2: since all interest charged will be reported based on the social security number noted on the loan file, your sister will be getting the 1099. this, of course, is a question better asked of the irs or a tax advisor, neither of which i am. there may be a way in which you can get the benefit of the interest payments, but they'll be able to tell you far better than i.

number 3: inasmuch as your arrangement to purchase (i believe) isn't going to give you ownership at this time, i'd suggest that your sister's policy would remain in effect. of course, that's something that the insurance company would wish to know about, because as soon as she moves out, it is no longer a policy covering owner occupancy (hers). i'll defer to an insurance agent on this.

so...i have plenty of opinions, but the strongest held of those opinions are that you ought to take your questions straight to the authorities on these topics (lawyer, irs or tax advisor, insurance agent...in that order).

Guest

Can a land sales contract be done if the owner owes money on the home? If we do a land sales contract and pay the taxes & insurance, do we get to claim the insurance on our taxes? If we pay on a land sales contract for say 3 years, will that help at all to get financed even with iffy credit?

jenkin7 · Posted: Thu Feb 04, 2010 2:03 am Post subject:

Hi Jeffrho,

If the owner owes mortgage on the home, he cannot do a land sales contract. If he does, it could be a violation of the mortgage agreement. He will have to consult the lender before entering into a land sales contract. In case you sign a contract with the owner and make payments on time, it can help you improve your credit. However, you cannot expect your credit to improve a lot since your name will not be on the mortgage and the payments made towards it will not help you repair your credit.

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Is owner financing real estate legal?