Posted on: 29th Nov, 2007 12:34 pm
What are the danger of buyer's default to pay the mortgage or to pay tax or home owners assosiation fee?
The pitfals are now you become the bank. You become a landlord that forfits ownership rights but has the ability to forclose upon. You assume all the risk the bank does but you no longer have the responsibilty of upkeeping the property. If the person doesn't pay taxes then the town/county puts a lien on the property behind your mortgagei lien, if they don't pay HOA dues then the HOA puts a lien on the property behind your mortgage lien.
You are probably considering this because the market is tough and your prospective buyers can't get financed through a bank the way they want. It's not a bad idea but there is a rason the banks won't lend them money. Just make sure you have a good real estate lawyer that puts in a very favorable for you revocation clause. If they don't pay their mortgage then they don't pay you. you will also want to consult your tax preparer also as to what your taxes will now look like as your income will change. Also if you have a mortgage currently on the property then make sure you can cover it if your person you are lending defaults on you.
Remeber also you will no longer own the property you have sold it in title to get title back you will have to go through all the channels of a forclosure.
Best of luck to you
You are probably considering this because the market is tough and your prospective buyers can't get financed through a bank the way they want. It's not a bad idea but there is a rason the banks won't lend them money. Just make sure you have a good real estate lawyer that puts in a very favorable for you revocation clause. If they don't pay their mortgage then they don't pay you. you will also want to consult your tax preparer also as to what your taxes will now look like as your income will change. Also if you have a mortgage currently on the property then make sure you can cover it if your person you are lending defaults on you.
Remeber also you will no longer own the property you have sold it in title to get title back you will have to go through all the channels of a forclosure.
Best of luck to you
"If the person doesn't pay taxes then the town/county puts a lien on the property behind your mortgagei lien,"
The tax lien is paid first.
bad is not,
If you have a mortgage you are probably not allowed to do owner financing. If you transfer ownership your lender can call your mortgage due in full immediately.
The tax lien is paid first.
bad is not,
If you have a mortgage you are probably not allowed to do owner financing. If you transfer ownership your lender can call your mortgage due in full immediately.
Eric yes it is paid first, but it it does not take over first position on the title.
You would have to foreclose on the property if there was default from the buyer. This is task that you dont want to take on an an individual. I would not advise owner financing.