What is the owner finance process?

Question

I have a house under contract, the bank was giving me trouble so the seller and I agreed to seller finance. We have agreed to a price, interest rate, downpayment, and balloon payment terms, and would be to 30 years. This house is fully paid off by the seller

Now that all the terms are agreed to, what are the next steps? who can prepare the paperwork for us? do I go to a title company? the seller and I have our own agents because we originally tried the conventional way, and we still want our agents to get paid.

any guidance on the next steps and how the process works is greatly appreciated.

Andrew Postell · Answer

@Alvaro Rodriguez thanks for posting.  Always great to hear from a fellow Texan.   The seller is the responsible party here for providing you with financing documentation.  Meaning, if the seller makes a mistake on the documentation, it's on the seller.  If they don't want to even have any paperwork...like a handshake deal...that's on them.  Reporting to your credit, servicing your loan, etc - all on the lender, who in this case is the seller.  Now, as mentioned above, most title companies in Texas can draft some basic documents that can help with this...but not all.  The title company does need to have an attorney on staff (not all do).  So which title company is on your sales contract?  That's who I would start with....meaning, that's who the seller should start with especially since the seller chose that title company in the first place.  I'm saying all of this for a reason, you don't want the liability of drafting these documents.  All of this is on the seller though...just keep that in mind.

Alex Gunnerson · Answer

Hi Alvaro, an experienced real estate attorney is who I would turn to here. Another option, try an investor who has experience doing seller finance deals in your area and have them guide you through the process. If you went with option B you'd obviously have to give them some of the cut, but you would be building a relationship that could pay for it self down the road.

Louis W. · Answer

It's great that you and the seller have been able to come to an agreement on the terms of the seller financing arrangement. The next steps will depend on the laws of your state, as well as any specific provisions that you and the seller have agreed to include in the contract.

Here are some general steps that are typically involved in seller financing:

• Have the contract reviewed by a lawyer: It's a good idea to have a lawyer review the contract to ensure that it is legally enforceable and that it accurately reflects the terms of the agreement between you and the seller.
• Get a property appraisal: In order to determine the value of the property, you may need to get a property appraisal from a licensed appraiser. This will help you and the seller determine the appropriate amount of the down payment and the overall purchase price.
• Obtain financing: You will need to obtain financing for the portion of the purchase price that is not covered by the down payment. This can be done through a traditional lender, such as a bank or credit union, or through a private lender.
• Close the sale: Once you have obtained financing and have met any other conditions specified in the contract, you and the seller will need to go to a title company to close the sale. The title company will handle the transfer of ownership and ensure that all necessary documents are properly recorded.

It's a good idea to involve your real estate agents in the process to ensure that everything is handled correctly and that all parties are protected. They should be able to help you navigate the steps involved in seller financing and can assist with preparing the necessary paperwork.

What is the owner finance process?

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