How does someone do Owner Financing on a house?
Filed in Renting & Real Estate on Oct.26, 2008
I am looking to sell my house and offer owner financing to open up for more potential buyers and an increased sales price. I need to know what paperwork I need to do to complete the transaction. Do I need to notify my current lender? Should I consult an “expert” or is this something I can do myself? I rather not pay someone if it is just a matter of doing the leg work…
Any help would be appreciated since I have searched all over the internet and have been unable to find the answers I need.
By: k_ttyc_t
About the Author:
October 27th, 2008 at 6:41 pm
It may be possible to do it yourself if you’re just trying to put a 2nd on, leaving the property in your name [and ultimate responsibility for the current loan], but you’re playing with fire regardless. If you’re in a ‘deed of trust’ state [rather than a 'mortgage' state], you should definitely contact an atty. Basically you would need a security instrument [either a mortgage note or deed of trust] and a promissory note [the repayment terms]. You’ll need a warranty deed to convey the property if you’re truly selling it–the title company may be able to help with the deed. Often, these forms can be obtained at ‘old time’ office supply stores, but completing them correctly is something else. However, your current mortgage probably has a ‘due on sale’ clause if you’re doing a complete sale, which means that when ownership is transferred, the lender expects to be paid in full. The accounting [the payment split between principal and interest] changes with each payment, so it could be an accounting nightmare if mishandled. So you can see, there are a lot of technicalities here. I haven’t even gotten into ‘title work,’ which the buyer may rightly be expecting, IF you’re doing a real sale. You might want to consider a lease-option, which leaves you in ownership while the buyer makes monthly payments to you [and adding to the downpayment over time].