Question about owner financing

ibjoy1953 · Joined: 05 Aug 2008 Posts: 2 2.17 Dollars($)

Hi,
We are renting property, and the tenants want to purchase the property, with owner financing. We haven't checked their credit report yet...but was wondering, If they happen to bankrupt, would we lose the property, or could we take it back?
And...what is a good interest rate...the banks wanted 9.0% apparently their credit isnt the best....so just wondering what a good rate would be.
Thanks much.....
And we are getting a lawyer to write the agreement, but just wanting some information....thanks

sweeney · Joined: 20 Jul 2008 Posts: 92 20.32 Dollars($)

If your having credit concerns or concerns of their ability to pay, I would avoid the owner financing. Personally, I would avoid it anyway. I think you'd be putting yourself in a very risky position with a lot of potential headaches down the road.

Have them go get an FHA loan so you're out of the picture. Or have they already applied for a mortgage and been turned down?

smckaybiz · Posted: Tue Aug 05, 2008 7:38 pm Post subject:

Hello ibjoy1953, welcome to the forum. I would also agree that owner financing is not the best way to go. If they said they were offerred 9% than they have already begun the process of qualifying for a loan themselves.

Think of it as a gamble. You could act quickly and take a high risk at making some money(like most banks have done and are now paying for it!) or you could slow down and wait until the right opportunity presents itself without much risk involved.

By the way, I would really ask to see copies of their credit before continuing any further to possibly save yourself some time.

Either way you choose best of luck,

ibjoy1953 · Joined: 05 Aug 2008 Posts: 2 2.17 Dollars($)

Thanks to both of you for your advise. They have tried for a loan, but they have to come up with a down payment that they dont have.
We wanted to help them, but at the same time....don't want to risk losing the property. We are going to get a credit report from both of them...and talk to a lawyer. We're not making any agreement until we have all of the facts...and if we dont like it...they we will not go forward with it.

Thanks again for your help....we are just trying to find out all we can...and get all of the advice we can before making a decision either way.
Joy

Niicss · Joined: 03 Oct 2005 Posts: 1018 151.63 Dollars($)

Welcome back ibjoy.

Good to hear that you are consulting with a lawyer on this issue. You can help them to make the down payment only if they have good credit and if they have enough earnings to pay you off. So check their credit and income before you come forward to help them.

Let me know if you have any further queries.

Jessica

Hi ibjoy,

Welcome to our community forums.

I too feel as if owner financing wouldn't be the right choice here. They haven't been able to arrange for a down payment which is hardly 15-20% of the purchase price of a house.

Moreover, you said they may file bankruptcy. This means probably they have a lot of debts and possibly negative items on their credit reports. So, allowing for owner financing would have lot of risks. It's better that they arrange for financing from a bank or lender especially an FHA approved lender.

Regards,

Jessica.

Guest 0.10 Dollars($)

With seller financing, don't the seller's retain the deed until the home is paid for? If yes, I am just curious how the buyers could lose a home that they don't technically own yet.

jameshogg · Posted: Sun Aug 10, 2008 10:40 pm Post subject:

Welcome nyko,

It's true that the seller retains the deed in owner financing until the buyer pays it all. But what it implies is, the buyer cannot get ownership rights if he's not able to pay the entire price.

Thanks

smckaybiz · Posted: Tue Aug 12, 2008 4:19 pm Post subject:

Another thing to consider Nyko is that if they get into this situation and the buyer ends up not keeping their end of the deal, then the owner might end up having to make two mortgage payments instead of one until they can find another buyer/renter.

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