Owner financing???

[THEFAN]

I am curious if anyone here is familiar with owner financing on property?? I found a guy who has 32 acres for 32,000 at 3%. No early pay off penalty. I figure I could pay it off in 4 yrs maybe 5 at most. Info would be great on this type of financing.

The property is mostly wooded with a yr road stream off from Maine rds. HMM!! Thank you all for looking and answering

 

[~gd]

I am curious if anyone here is familiar with owner financing on property?? I found a guy who has 32 acres for 32,000 at 3%. No early pay off penalty. I figure I could pay it off in 4 yrs maybe 5 at most. Info would be great on this type of financing.

The property is mostly wooded with a yr road stream off from Maine rds. HMM!! Thank you all for looking and answering

It is pretty much the same as a bank issued mortgage except the mortgage is held by the seller. THIS IS NOT THE SAME AS A RENT TO OWN OFFER which you should avoid unless you have a very solid lawyer look over the paperwork. I offered to hold the mortgage on a house I owned in a depressed area but the buyer was able to raise all the money through his family so bought it outright. Basically you have a mortgage drawn up specifying minimum payments at different periods usually monthly. It is usual to allow the buyer to pay up early the same as any other mortgage though some sellers want only the specified amount paid so to stretch out their tax liability. You should avoid such deals since it makes reselling difficult. The seller might want a 20 % down payment to prevent you from damaging the property and then allowing it to be foreclosed. Basically you have control of the property as soon as the deal is closed and you are libel for the taxes and insurance though they can often be paid thru the mortgage holder to protect his interest in the property. His interest ends when the loan is paid off in full and at that point you should insist on a document usually called a mortgage release to be filed with whoever keeps the property records in your area usually the county clerk. [In my deal we ran into a problem because I had paid off the mortgage years ago and either never received a release or at least never filed it with the county clerk]. I had to sigh an affidavit that the mortgage had been paid off and that I would defend the deed I issued to him if there was ever a claim in the future. Meanwhile some of my funds are being held until we can produce a valid release from the mortgage I had taken out on the place. The problem is that the mortgage was sold many times to different banks while the one that was servicing [collecting the payments] on the mortgage had since gone out of business and it was unknown who ended up with the mortgage.

 

[SSDreamin]

We have purchased a couple times on land contract. We have sold one of our houses, and have this one sold as soon as we can get out of it, on land contract. The majority of the burden (or risk) in a L/C situation is on the holder, in my experience. We bought a nice piece of property early in our marriage via L/C. It was a simple contract, cheap closing costs, and no penalty for early pay off. We paid off early, and the holder sent us a warranty deed, which we filed with the county. Others we've entered in worked exactly the same. We must be 'good risks' - one holder told us that, should we decide to buy something else, they would pay and hold the contract for us In the L/C where we are the holder, we inserted a balloon clause. It forces the people living there to refi and pay off after a certain amount of time (5 years, in our case). They are responsible for the taxes and insurance, although we could have set up an escrow account and paid those costs out of it. We may do that this next time, as I am anal about things being paid on time. We also have a family member who purchased a home on L/C. She was well into it before she found out that the holder had 'fudged' the numbers (lot lines) and made illegal improvements (i.e. placing the septic field on someone else's property!). A little money paid to a good real estate lawyer could've saved her some grief. Then again, in that situation, a quick county records search herself would've told the tale pretty easily too. So long as you protect yourself, this type of contract is preferable to me. I would much rather deal directly with the land holder, if they are willing. So many people have been burned being L/C holders, they are becoming more of a rarity around here. We are in the process of foreclosure with our first L/C people. Disappointing. I guess we tend to think that everyone is as diligent as we are.
If the price seems fair to you, the interest rate is great (we won't go below 5%). If it suits your needs and everything checks out, I'd say go for it. If he says he'd prefer to not register the L/C, or something just feels wrong, then pass, would be my advice (such as it is ). Good luck!

 

[curly_kate]

We have a land contract on the farm where we are living now. So far, so good. The terms were good, and we made sure to write a couple of things into the contract about how early we could refinance and when we could start building. Being a cheapskate, and being that the guy whose property we bough is DH's golf buddy, DH didn't want to get a lawyer involved, but I insisted. Might not have been absolutely necessary, but it's a lot of money, and I wanted to be sure the terms were fair and very VERY clear. That would be my only bit of advice.

 

[THEFAN]

Thank you all for the advice. I am going to talk to my lawyer tomorrow.

 

[k15n1]

Contract-for-deed usually has a higher interest rate because there's higher risk for the seller. And it's easier for the seller to kick your ass off if you start missing payments. This sounds too harsh, but my understanding is that a missed payment is highly correlated with default, so it's not much different from bank financing.

 

[edjanuary39]

We found our current place at a great deal. 10 acres in a lake town-a nice lake town, its a rent to own deal. 600 a month for 25 years. We will be paying a bit more than its probably worth, but its a straight contract- no interest, he cover taxes, and homeowners insurance. We have all the freedom to do what we please, I can paint the trees purple if I want. We figured it up (guessing at the numbers a bit) but estimating we will pay about 80,000 more than its worth (no appraisel- but there is oil on property too so our land is considerably more valuable than the neighbors and I'm basing the price off the neighbors land that sold 5 months ago) but the interest and homeowners and taxes would be minimum 100,o00 over 30 years so we are saving a minimum of 20,000 and we are on a 25 year contract, with the option to settle whenever we want. The negative is that we dont get the tax credits, and it doesn't go on our credit- but we can always add it to our credit later once we have some time built up on it. And he is very willing to work with us on money, as we have been a bit behind.

 

[~gd]

Do I need to tell you that you are siting on a bomb? He can tell you anything and even mean what he says. If he drops dead it is a whole new ball game. For your own peace of mind have a lawyer look it over and tell you what your legal standing really is! It sounds to good to be true. As a mortgagee you should have a bunch of options that you wouldn't have as a renter please be sure that you do!

 

[me&thegals]

This is the way we're going to begin buying DH's family farm. Even with family, we have had MANY visits with the attorney to be sure both sides are protected. Even with family, our word or their word is not enough. It must be in writing to protect relations and money.

Land contract is a great way to buy land--it's how we bought 40 from DH's parents when we built a house. Rather than the bank getting the interest, the original owner does. Usually lower interest and it can be drawn up for any length of time or payment schedule that works for both of you. Good luck! But definitely do it through an attorney and get it all in writing!

 

[edjanuary39]

Do I need to tell you that you are siting on a bomb? He can tell you anything and even mean what he says. If he drops dead it is a whole new ball game. For your own peace of mind have a lawyer look it over and tell you what your legal standing really is! It sounds to good to be true. As a mortgagee you should have a bunch of options that you wouldn't have as a renter please be sure that you do!

Thanks for the advice, we do have it in writing- all of it. We are in a bad financial situation, we moved in with father in law b/c he was fixing to loose the family farm(been in family sice before land run-oklahoma-100+years) so it was important to save it, also had tax liens, no electric, no heat/ac, he had no job and when his cars got repossed, he had no way to get to a job. So we stepped in. It was a 2600sq ft home on 35 acres, so huge loss if we didn't. He started drinking- the kind that pass out in their own puke naked in the driveway-drinking. We have an 11 year old- so we didn't have a choice but to move and super quick! And we fell into this place. We had spent all of our money saving his place and fixing things like well tank, and fences and on and on, so I fell blessed to get out of that situation as fast as we did. But I will have someone look at what we signed, the guy is pretty nice and I think if we asked we could certainly revise. Thanks for your advice!