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mlgreening · Joined: 04 Sep 2008 Posts: 1 1.47 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

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

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.

Guest

I am looking for help with the same thing. I am the owner/seller and I am also trying to find someone who might be able to tell me what a fair interest rate would be. Thank you George for the advice about getting the credit report. I will order a report asap.

Guest

my house has been on the market for 4 months. The only serious offer I have had is from a couple that want me to finance the down payment of 10,000. for 6 months then finance the balance over 10 years. The buyer is 62 and has a life insurance policy that would cover the amount owed. I know
the wife and she is very dependable but I am thinking I should get them to get a loan from their bank for the down payment and I would finance the balance. suggestions??

gmakerley · Posted: Mon Jan 04, 2010 9:17 am Post subject:

i cannot disagree with you there, mga. taking on 100% financing is too risky for institutional lenders, and it wouldn't make sense from a personal standpoint - regardless of your knowledge of the dependability of the wife.

things happen, and if they had a major catastrophe, you'd be out completely and facing a foreclosure action against them that would sap your energy and your pennies once again.

Guest

what would be an exspected down payment for a $125,000 owner finance? it needs a new roof and new wireing so would it be reasonable to offer smaller down so i can take care of that ?

gmakerley · Posted: Fri Feb 12, 2010 9:16 am Post subject:

jen, all aspects of an owner-financed deal are negotiable. you ought to sit down with the owner, be realistic about the funds you'll need for the needed repairs, and see what kind of deal you can make.

i'd say there's no particular answer to what is expected in the way of a down payment. each case would be different and subject to the agreement you and the owner make with each other.

Guest

I am 68 yrs. old and have owner financed two homes. I have had very good luck but got a good down payment like 15%. The first home I owner finaced I didnt lock in the interest rate for 5 yrs and they refinanced when interest rates went low. The second home my mothers I did. The most interest is in the first 5 yrs. The best thing I did was have a lawyer. At his time I am considering doing it again but thinking about a baloon note at 10 yrs. because of my age. I have no heirs but I think this would be the best interest I can make on the money if I sell. Am I thinking right?

Guest

You can go ahead with the balloon note for 10 years. It would be a good option in my opinion. As you've a lawyer, you should take his opinion in this matter as well.

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what is the interest rate for a owner finance sell?