Owner Financing Question

7 Replies

Ok, a quick run down of the situation. Any feedback is great. 

My cousin rents a house from her husbands uncle and he is offering them to buy the house through owner financing. My first question is what are the pro's and cons to this oppose to going to a traditional lender? My 2nd question is the uncle has a mortgage out on the house still, can he finance something that he doesn't technically own? 

I will obviously advise her to contact a lawyer, but i wanted to see what feedback I could give her from this great website first. Thanks in advance all. 

If you are in New Jersey, 

And are dealing with family,

1. Pay market rent

2. Get a ROFR (right of 1st refusal.)

3. See a mortgage originator and get pre qualified for a home loan.  If you have obstacles the loan originator will let you know.

4. Save 10% of your net income for a down payment, going direct deposit into a bank account.

See

http://www.biggerpockets.com/blogs/3/blog_posts/38...

Why a ROFR is better than an option.

Originally posted by @Brian Gibbons:

If you are in New Jersey, 

And are dealing with family,

1. Pay market rent

2. Get a ROFR (right of 1st refusal.)

3. See a mortgage originator and get pre qualified for a home loan.  If you have obstacles the loan originator will let you know.

4. Save 10% of your net income for a down payment, going direct deposit into a bank account.

See

http://www.biggerpockets.com/blogs/3/blog_posts/38...

Why a ROFR is better than an option.

 Thanks Brian, I am not sure you answered either of my original questions. I appreciate the advice, but if you could please answer the question that is the whole reason I made the thread. I plan on giving her this advice, but still am not sure how a owner finance is any different than a bank finance. How does that benefit the buyer?

You have much more flexibility with an owner financed property.  Your not paying bank fees, appraisal (usually not) and realtor fees that is if you found the deal.  I like the fact you are negotiating the purchase price and terms. 

I've paid over retail for seller carry.  It got me in the door to peel the onion and get another property they owned  

If the seller has an existing loan I've heard of people doing a wrap where you make the loan payments.  

Frank

Frank Romine, Real Estate Agent in CA (#01957844)

Perfect, thanks Frank. One more question isn't it in their best interest to still get the house appraised to avoid over paying? 

If it is for a primary residence yes.  Investment property probably no unless you are a newbie.  For an investment property run the #'s, does it pencil out?  Look at worst case scenario, not best case.


Frank

Frank Romine, Real Estate Agent in CA (#01957844)

it's her primary. Ultimatelty she is getting an attorney, but I wanted to give her as much info as I could. 

Thanks 

If your uncle has financing, he can still do a all inclusive trust deed which is sorta like a mortgage that wraps around his mortgage. I've done this several times on my deals when the seller has a mortgage left. I like owner financing because it is very flexible and you can create the terms that fit what you want.

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