Pittsburgh, PA · Member since 2010 · 87 posts · 14 votes
Hi.
I had my first prospective buyers look at the MH that I just picked up for $2750. One is a engaged couple that is not in a great hurry and whose Dad would help out to pay cash (and whose Dad may also look the place over.
The second prospect is a lady that is 8 months pregnant with two kids whose brother lives in the Park and whose Mom lives right next to it; very motivated.
Of course, I will do a background and credit check on her (anyone use the one that Josh has suggested?). If her numbers are OK (salary included), she is offering $1000 down on my Cash sale price of $5500. She claims that she has a significant tax return coming, perhaps in February (almost 5K seems awfully high. How could I verify this? See her tax return?)
I would have charged her 12.75% interest if she needed financing for between 24-36 months. How would I work it out in the contract if she could pay me off so soon? I'm a little confused about a monthly charge (would that start 60 days after the sale?) and a balloon payment. Any suggestions on how to structure it?
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
14y
Structure it as a seller financed sale for the terms you want and if she pays it off sooner, the value to her is that she'll eliminate the interest payment. No need to do a convoluted sale based on her telling you that she has money coming...it's probably not true anyway...
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
14y
If you do structure this as an owner carried note, you need to bring in a licensed broker to facilitate the transaction to stay within the legal limits of your State law usury (max of 12% for loans under $50k. Be careful not to violate usury laws.
You also may want to look into the Dodd Frank Act passed last January, 2010. It dramatically affects how an owner can sell their home on an owner carried note.
Investor · Austin, TX · Member since 2009 · 410 posts · 295 votes
14y
Hi Philip,
Congrats on the newest deal!
I agree with Will when he mentioned to stay within the law creating a seller financed note. The times have definitely changed and creating a note with interest can be risky.
J Scott is probably correct when he says that the buyers will not likely hand over their tax return to you to pay off the home in Feb.
My 2-cents: You are creating a service for any motivated buyer. Increase the sales price and eliminate the interest. Structure the payments for at least 5 years.
Involved In Real Estate · Thornton, CO · Member since 2011 · 1 post · 0 votes
14y
She has two children so she probably qualifies for earned income credit, so it is very likely that she will have a tax return of $5k. Whether or not she will part with all of it is another story.
Investor · Central America, Panama · Member since 2010 · 423 posts · 293 votes
14y
There is a one hour audio at www.lonniescruggs.net which explains the solutions and ways to stay legal with the SAFE Act. It's well worth listening to if you're selling anything with seller financing.
You can also listen to Lonnie's legendary talk, Create Your Own Economy at his web site.
Specialist · Springfield, IL · Member since 2011 · 700 posts · 479 votes
14y
Jackie - With all due respect for Lonnie, no one can teach everything a lender needs to know about the SAFE Act in an hour. Our firm is considered the manufactured housing industry authority on the SAFE Act, and we have done hundreds of speaking engagements on the subject at MHI, state associations, and the major buyer's groups since the model legislation was proposed, and we can't do it in an hour for one state, let alone for 50 states - the laws vary somewhat from state to state.
In addition, the SAFE Act is only the tip of the iceberg regarding the laws, rules, and policies those engaged in seller financing must deal with. Anyone who proclaims otherwise is either ill-informed or of ill-intent.
People using these forums are looking for some help and when it is about repairs or refurbishing, the information is normally worth considering. People like John Hyre who posts here and elsewhere are real experts on the subjects they post on. When it comes to understanding the legal compliance issues of seller financing, everything changed because of the SAFE Act, and the followup Dodd-Frank Act, but the SAFE Act is not the whole story.
Many, many seller financiers were "flying under the radar" of state regulators before the advent of the SAFE Act, and were breaking laws left and right. Now the state regulators are aware of the situation. Worse, the CFPB is now the new law in town and they have explicitly written about seller finance in the manufactured housing industry and their intent to regulate it just as they are now regulating banks. There will be no flying under the radar, and many Lonnie Dealers may well end up bankrupt from fines and sitting in a gray bar motel.
If anyone wants to take that chance for themselves, that is their choice. To encourage others to take the same chance without explaining the danger for some personal short-term gain, is beneath contempt.
In fairness to Lonnie, I could not find the link you referred to, so I have no idea what he said, or didn't say, on the subject matter. This post is directed to all the "self-appointed experts" who make the issue of compliance sound easy, when in fact, it isn't.
There are solutions, and our company is one of several that offer help to those engaged in seller financing, in addition to the maybe 30 law firms that are qualified on the subject. (We have been holding workshops for attorneys for three years to get them up to speed on the subject.) The biggest hurdle is not knowing what you don't know. Once that education is accomplished, strategies can be developed that fit the individual operation. None is this is free, using us, or anyone else, and the internet or a book is not a substitute for retaining expert consultants and/or attorneys.