Owner Finance not selling in Arlington, TX- What am I doing wrong

49 Replies

I bought and remodeled a property in Arlington TX a few months ago, and my plan was to do a wrap.  The remodel was pretty basic, but it presents pretty well.  Now I'm trying to sell with an owner finance.  I was under the impression that there's a large audience of people who can't qualify for conventional loans but want to buy houses, and owner finance buyers are less picky about cosmetics and things.  I'm using a realtor who says she has experience with owner finances, but I haven't used her previously.  I don't think I'm pricing too high (asking 172k) 

Here's a link to the house: https://www.redfin.com/TX/Arlington/3405-Chesapeak...

So can anyone who has experience with owner finances give me some pointers on what I can do to help this sell? Are there other avenues for targeting specific demographics that I should be utilizing?  I really don't want to put a tenant in and hold it, but I will if I have to. 

Thanks in advance!

@Rivy S. The rehab looks nice. What are the deal terms you are asking when an interested buyer comes along? Or has no one had interest in the property at all? A lot of us on BP are looking for owner financed deals, but it all depends on the terms you're setting. Let me know!

@Elenis C.  There has been some interest (not a ton), but nobody has come through yet.  

I don't think the terms are such that an investor would be interested in.  The terms I am asking for is 10-20% down, 10-12% interest (depending on down payment), 30 year loan.  Buyers need to provide proof of funds for down payment and 3X payment of monthly income to view the house.  

From the information I gathered from multiple sources, these are fairly standard owner finance terms for home buyers in the area.  I'd be glad to be corrected if I'm way off base though. 

@Rivy S. Does seem like a standard one. I've contacted a few about doing owner finance and they ask pretty much the same. The interest a little lower but still, you're not asking for 30% down like some ask.

Is there a reason you don't want to put a tenant and hold? Is it because you don't want to deal with managing a tenant or is it because you need the 10-20% down payment money? Are you also open to bank financed buyers or you're purely wanting to do owner financing? Asking all this to see if I can help come up with some ideas. 

Am I reading your terms correctly?  You want 10 (ten) to 12 (twelve) % interest?  10% interest payment (no principal reduction included) on a $136,000 loan (20% down) is $1,133 per month.  Plus taxes, insurance, maintenance, etc.  Rough guestimate, total monthly would run $1,450--$1,500/mo. 

How much would the house rent for?  What would be the motivation for a buyer who has $35K to put down to have monthly payments the same or higher than rent?

I'm in PA, not TX, but I have a feeling the payments are what's keeping your activity down.  Try reducing the interest rate.

@Elenis C. The reason I'm aiming to scale with wraps is because the reserves needed to responsibly maintain a long term hold, combined with the headache of managing, make it not compatible with my goals.  With my rentals, after withholding (very conservative) reserves, I am only clearing about 150/unit/month in true cashflow.  At that rate, I need about 70 units to retire.  That is not happening anytime soon.

With a wrap, the burden of managing, as well as the need to reserves goes away, and the cashflow can be about  600/unit.  That is much more realistic for my situation, even though I know that I will lose many of the advantages of real estate investing (Appreciation being the biggest)

@Marc Winter  

It is not an interest only loan, it would be a regular mortgage amortized over 30 years.  People who can't get loans for a bank understand (at least from what I've been told!) that they are going to have to cough up more in interest.  The motivation for paying equal/more in mortgage than in rent is that they will eventually own the house...

Yeah, 10-12% interest seems awfully high.....you’re in hard money rates territory.  You may also have a Usary rate issue.

@ 10% down, 12% just P&I is right at $1600/mo, Double what it would be at 4.5%.....most buyers aren’t  really that stupid or desperate.

@Rivy S.   I understand.  I was giving an example for you to think about.  Only trying to help.  Activity/Inactivity in real estate is always price-related.  Good luck with the project.

I'd love to hear from people who are actually selling with owner finance in DFW what the going rates are. If I'm too high, I will definitely adjust.  It's just that from what I've heard from people in the area, those are acceptable terms, and wouldn't explain the lack of activity.  

Here it is, down and dirty. 

First and foremost, list it on as many sites as possible and be consistent with all your photos and descriptions across each site.

1) your lead pic and all of your outside pics are a real turn off. The house has little to no curb appeal, the lawn's not mowed and mostly weeds, the bottom 3 feet or so of the brick is quite dirty (could be an indication of bad gutter/water run off problems). Take a look at it from a buyers eyes.

2) good job on your inside shots - 2 considerations, all though small, could have a big impact! A) fire place, this should be a focal point but it blends with the paint and flooring. B) Mirror in "vanity area" in MB, update this to a more modern mirror. Both can be inexpensive fixes with big impact.

3) your copy writing needs work; You have some great selling points regarding location, upgrades, and owner financing. You just to punch up your copyrighting. Check out listings by TOP realtors in the area and see what they are writing. Use words that evoke emotion and excitement.

4) why is it "owner financing only", you wouldn't take cash? this is confusing and raises a red flag for me. I would never use it as a title for the ad. never state your terms in your ad, only state "possible owner terms". I don't recommend using the word "financing" it could lead to issues. This will entice them to call, so you can have a conversation.

I hope this helps! 

P.S. your terms are reasonable, and I invest in several Texas markets, including DFW. HOWEVER, that said, everything's negotiable and the most important thing is that it pencils out based on your criteria, it's all in the math!

@Rivy S. Understood. I was looking at the rental comps in the area and they seem to be around $1500 for the same size house as yours. Lets say the buyer puts down 20%, their monthly payment at 10% interest would be $1,228 per month plus taxes, insurance and lawn maintenance if they don't do it themselves. So right there the terms won't work for an investor. You are solely relying on someone who wants to buy to live there and on top of that it has to be people with either bad credit that cannot get a house through traditional means. Many of those people do not know what owner financing is either. Even many realtors don't know what it is. 

What kind of feedback did you get from the potential buyers who came through? Were they looking to live there or investors? 

I would explain a little more in the description to show them what owner financing is. See if your realtor knows of any way to reach out to these buyers that cannot qualify for a conventional loan. They do exist, they are just a little harder to find I think.

@Rae Copitka   Thanks for the detailed feedback!

I will have to have a look at sprucing up curb appeal.  That has been feedback I got from a showing agent as well, so this reinforces the need. 

I let the agent handle the copy for the listing, I can do more research on more engaging text

At this point, I would not accept cash. My goal with this is long term cashflow, which would obviously not be accomplished with a cash sale.  Also, since I took a loan on this property I can't sell for cash within 6 months or I believe I will incur a penalty on my lender.

@Rivy S. There is a great point in what @Rae Copitka said about the pictures!! If you are trying to appeal to regular home buyers, the image is everything. Hire a professional to take and edit pictures. I had a PM take them for my rental and look how nice they look (link below). Your home is bigger and nicer on the outside than mine, but the pictures don't show it. It's true what you said about that the rates don't explain the lack of foot traffic coming to the property. It's all about the description and the images. Maybe also getting a new realtor.

https://www.zillow.com/homedetails/2333-University-Blvd-N-Jacksonville-FL-32211/44519902_zpid/

@Elenis C.  Yes, I wasn't targeting investors for this property, only home owners who can't qualify for mortgages.  You make an excellent point about less financially educated people not understanding the term owner finance.  Maybe I should update it to say something like "rent to own" or similar language. 

"owner carry" and "rent to own" are good attention getters. BUT, if you are looking for good, steady, responsible people, consider reaching out to mortgage brokers in your area and let them know what you have, what you are offering, what kind of client you are looking for, AND that you will offer them a finders fee for a buyer. Maybe do up a flyer to take around to your local agents/brokers. 

ALSO, make sure to do your due diligence; check references and previous landlords (ask landlords questions only they would know the answer to), obviously, you need a prospect first...

Good luck!

@Rivy S. Hey I’m still in learning mode here. So pardon, if I‘m missing something obvious. You said you dont want cash to incur a penalty, but if you do this seller finance thing with a loan outstanding, aren’t you also at risk for due on sale clause?

Rent to own and Owner finance are great terms.  Anyone who has been turned down for a mortgage, will get their attention.  I think the down is a bit high but that's just me.  

The headline, Owner finance ONLY is scary.  You present that as a threat not an enticement.   Rephrase.

"Self employed?"  Can't qualify?  THIS is the home for you!   Owner will carry the loan for the right family!"  

Everyone thinks they are the right family.

@Rivy S. Realtors will not waste their time with buyers who cant get a loan. Craigslist or a fsbo site has got to be where your buyers are looking. “No bank needed” is anither catch phrase. Rent to own is associated with predatory type arrangements...imo. And you really dont want to rent anyway. The car industry uses “we tote the note.” There has got to be plenty of self employed with bad credit and cash around every large city. Good luck.
@Rivy S. I agree with Rae on the pictures and the home presentation. The house looks dated on the outside and the grass and some bushes look dead. Also, the appliances look older (dishwasher & stove) and I can see grease stains from your pictures underneath the vent hood. I would say, check out the competition in the area, to see if at your price point, the home is similar on the outside & interior. Best Wishes!
Hi @Rivy S! I’m a super visual person and my first impression is that the exterior does not match the beautiful interior. In addition to cleaning-up the landscaping, I would also consider something besides the mustard yellow above the windows and on the garage door. The inside has a modern look, but that color is very dated. I’m thinking a dark brown would look very nice. It would also help to conceal the windows in the garage door. Those style windows are also dated. They would blend in more with a darker color. It’s a simple update that I think would help!