Real Estate Investor · Bellevue, WA · Member since 2015 · 36 posts · 4 votes
Hi, I'm selling my property in Hawaii and have an offer from a nice family but they're pre-approved for 70K less than the selling price. I'd like to counter offer, offering them to finance the 70K they need. It should work since the property comes with a legal detached 2 bedroom unit that rents for about $2200.
Are there any attorneys out there who would be able to help me make sure that the terms are clear and that we're protected legally. Thanks!
If anybody here has previously represented clients offering a partial seller financing please contact me A.S.A.P. please!
@Brian Gibbons Thank you! My current loan isn't FHA and the seller's pre-approved loan more than covers the remainder on our mortgage. You're saying my first step is to find a title company in Honolulu correct?
Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
11y
@Allan L. it's not clear to me if your seller financing is a second and they are financing most of it with a first. If so, that could be a problem. I don't know of any conventional lenders that allow a 2nd in the form of seller financing but check it out.
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
11y
@Allan L.- definitely get an attorney referral from a title co as @Brian Gibbons suggests. Close with them, do title ins, etc all by the book.
Most likely the buyer will need to secure the loan with other collateral, not your house. If they have other real estate it would be ideal, but you might have to look into UCCing autos or boats or something. Can get tricky. Good luck and please keep us posted!
An alternative would be some kind of a contract for deed or a lease purchase
I like lease purchase better, you have a lease first and last months rent or whatever the maximum-security deposit is, and a sale and purchase agreement, which has a long settling date in the future, and get a very large earnest money deposit
In California the maximum is 3% that buyers can forfeit in case you don't get the mortgage
I like to lease purchase because buyers really do need to get their mortgage soon
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
11y
Holly crap, take the simple path first, see the buyer's lender if you can carry a second, if so, do the deal. If the property appraises out you should not have a problem if the buyer has the down payment.
Next, is your sale price in line with the market value?
If not, then any creative BS probably just leads to future problems.
What's the goal? Sell or screw around with ploys that expose you to predatory lending or dealing issues.......your choice!
If your price is right and they can't buy, just say "next"! :)
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
11y
I agree with Bill, the cart is before the horse here. First thing, find out from the buyers lender IF they will allow a seller carried second mortgage behind them. If the answer is no, which it may likely be, move on.
If the answer is yes, then you locate an attorney to draft your loan docs. I am not a fan of the advice of using a title company's attorney reference. I have found that title companies are often inept when it comes to real estate investor situations. Secondly, their job is to protect the title company, not you. I recommend you find a real estate attorney in Hawaii that has plenty of experience doing owner carried notes for an owner occupant loan. You have Dodd a Frank, RESPA, TILA, and all kinds of issues there. Thus would be my very last choice if I were in your shoes.
My first choice is to find a buyer who will pay the price and be approved for the full amount to cover the purchase. Have you had problems finding other buyers? If so, it is likely due to one or two factors or both, your price is too high or your marketing is not good enough.
Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
11y
Yes. Keep it simple. That said, it seems like you are saying that the sale price is $X and the buyer is short $70k in finance approval. So in example they are approved for $100k and you are selling for $170k.
That means - they can't afford your house.
They were approved for a loan, likely at a conventional rate but the total loan amount is not high enough to accommodate your property. If I am reading your post right.
If that is the case, skip them and find a new more qualified buyer. Seller financing will not solve their inability to service a loan of what ever size is needed to buy your property.
If that is what you meant, if you clear it up we can give you some additional commentary.