OWNER FINANCING OFFER W/ MORTGAGE ON HOME- WHEN?

3 Replies

Hi everyone,

So I understand that owner financing works best if the home is free and clear. However, I was wondering to what extent would you consider to offer that option to a seller that has a mortgage on the home. The big thing is the "due on sale" clause and I get it. I guess I was hoping if there was an story out there where someone made that offer and worked something out with the bank to not call the loan back. Someone told me they reached out to the bank in advance and it was fine, but how often will that happen? Just curious. Thanks.

Originally posted by @Asher Carr :

Hi everyone,

So I understand that owner financing works best if the home is free and clear. However, I was wondering to what extent would you consider to offer that option to a seller that has a mortgage on the home. The big thing is the "due on sale" clause and I get it. I guess I was hoping if there was an story out there where someone made that offer and worked something out with the bank to not call the loan back. Someone told me they reached out to the bank in advance and it was fine, but how often will that happen? Just curious. Thanks.

DOS calls are rare. It usually happens only when the buyer or seller call the bank and ask the bank for their blessings, Not a smart thing to do IMHO and it's unnecessary to contact the bank. I just did one for a Joint Venture client at

https://www.biggerpockets.com/forums/600/topics/58...

and you can kind of get a feel for how it is done. There is an existing loan on this one. Just make sure you follow the law and that you have plenty of money in reserve.

Originally posted by Account Closed:
Originally posted by @Asher Carr:

Hi everyone,

So I understand that owner financing works best if the home is free and clear. However, I was wondering to what extent would you consider to offer that option to a seller that has a mortgage on the home. The big thing is the "due on sale" clause and I get it. I guess I was hoping if there was an story out there where someone made that offer and worked something out with the bank to not call the loan back. Someone told me they reached out to the bank in advance and it was fine, but how often will that happen? Just curious. Thanks.

DOS calls are rare. It usually happens only when the buyer or seller call the bank and ask the bank for their blessings, Not a smart thing to do IMHO and it's unnecessary to contact the bank. I just did one for a Joint Venture client at

https://www.biggerpockets.com/forums/600/topics/58...

and you can kind of get a feel for how it is done. There is an existing loan on this one. Just make sure you follow the law and that you have plenty of money in reserve.

Thanks Mike.

We have done a number of Wrap mortgages and we like using seller financing this way a lot.

Banks executing DOS clause for performing notes is EXTREMELY rare in our experience.

As long as their payments come in every month and the home remains insured, it would be really surprising to see the bank call the note.   They would almost be guaranteed to lose money if the owner could not pay...

The two types of sellers who are most open to Seller Financing in our experience are:

- Sellers who are stuck on their sales price.   If you can offer them full asking price but with favorable seller financing terms to you, they might bite.

- Sellers who don't need the cash right away and understand the power of interest and see how much more money they can get by selling with financing vs. selling for cash.