Rental Property Investor · Brookline, MA · Member since 2013 · 1k+ posts · 777 votes
12y
Essentially you just pretend the seller is bank. I'd create a private mortgage that functioned the same way any other mortgage would; if you default, the seller gets to keep all their money AND gets the house back. The title still transfers to you so the only lien you carry is the mortgage.
Beyond that you need to reach an agreement with the seller for terms. Most people don't even know you can do seller financing, so I'd be prepared with a really well done document that explains the process in REALLY simple steps. Plus make sure you reference some place the seller can go to verify your proposal.
Im still not sure I understand how this is beneficial....from what I gather, if I was to do owner financing it would be at or near retail price......how does that work to my advantage?
Is there anywhere on here to find a seller financing proposal?
Rental Property Investor · Brookline, MA · Member since 2013 · 1k+ posts · 777 votes
12y
I don't know about a proposal on here. I'd make sure I understood it to a "T." Then I'd write up something that I could explain to anyone. Graphics and arrows are good :)
I don't believe you need to be concerned about the SAFE act. The contract is private and only between 2 people, there is no intermediary. My understanding is that the private mortgage is simply a private contract with a formal way of presenting the collateral. It makes everything simpler down the road if the seller needs to sue you for some sort of breach. Plus it follows the "put everything in writing, up front" rule for contracts.
Thanks @Aaron Montague
Im still not sure I understand how this is beneficial....from what I gather, if I was to do owner financing it would be at or near retail price......how does that work to my advantage?
Is there anywhere on here to find a seller financing proposal?
Do I need to be concerned with the SAFE act?
Owner financing allows you and the seller to determine whatever loan terms you want. That could be beneficial to both parties.
Regarding SAFE, take a look at this FAQ. http://www.sml.texas.gov/tdsml_faq_mb_texas_SAFE_Act_seller_financing.html The seller is exempt from SAFE for the first 5 sales in a 12 month period.
In TX, you can hire a licensed residential mortgage loan originator to conduct the loan origination for the seller. I would recommend this to make sure the loan documents are legit. I would also recommend a third party payment processor to maintain the account and keep statements compliant with TX laws.
BTW, the seller could be eligible for an installment sale treatment which may be helpful for the seller's taxes. Not my space... but @Steven Hamilton II may be able to help in that regard.
Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
12y
Seller financing will allow them to earn some interest and at the same time receive a preferencial gain situation by moving the gain over several years.