what is the interest rate for a owner finance sell?

mlgreening · Joined: 04 Sep 2008 Posts: 1 1.31 Dollars($)

I am selling my deceased mothers home and the potential buyers want me to owner finance and charge them 6% interest. I am being told that 6% is too low, Is it?

chrisburns · Posted: Thu Sep 04, 2008 4:34 pm Post subject:

You might want to take to a real estate attorney to make sure you are covering your butt.

I would say that right now someone with good credit can get conventional rates around 6.125%.

Owners can charge whatever they like. Alot of factors should go into the rate you charge such as:

How much are they putting down?
What is their credit?
What is the loan amount?

Guest 0.10 Dollars($)

You have to ask yourself why can they attain a regular mortgage? Most likely because of bad credit. For which there may be an acceptable explanation. However you are taking a risk by selling the home this way, and my opinion is you should be compensated. To me 6% is a bit low. I agree with Chris speak to an attorney. As for the interest rate alone, I would start arount 7% for seller financed. But do your homework, check their credit, references, use an attorney etc. Undoing a bad situation can be time consuming and expensive.

gmakerley · Posted: Fri Sep 05, 2008 8:27 am Post subject:

i agree that 6% is rather low. at this time, that's a rate that only the most highly qualified of buyers would be able to obtain from a lender; or else someone paid a substantial amount of points.

7% might very well be a good starting point, and i concur with freaky1 that you'll need to verify their credit. one easy way to do this is to have your borrowers obtain their own credit report and hand it over to you so you'd easily see their background. of course, you'll want to know they have the income to pay you back, so you'd want to verify their wages also.

this is risky business, so be careful; consult with an attorney as well, of course, throughout the process.

i'll agree again with freaky1 but also amend the final statement: Undoing a bad situation need not happen if you do your homework up front.

Guest 0.10 Dollars($)

As NoteWorld's (noteworld.com) National Business Development Manager we are the largest servicer of seller financed transactions (so you don't have to do the collections, accounting, year end IRS 1098 reporting, etc...) in the US, so we see thousands of new transactions a month and 6% is way to low in this market.

Remember that down payment and interest rate are the two primary tools you have to guard against the increasing risk of default. The higher the down payment the less likely the buyer will just walk away from their obligation and a higher interest rate is typical as a reward for taking the risk of lending your equity --> example you could get 3.5% risk free by taking all the proceeds from the sale and depositing them into a CD but your investment is more risky in a seller financed transaction.)

We are seeing 8%-12% interest rates regularly on the newly created notes we are servicing.

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