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Randon B.
  • Appraiser
  • Austin, TX
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Please critique y Owner Finance Plan

Randon B.
  • Appraiser
  • Austin, TX
Posted Dec 16 2022, 07:30

I bought a house a few months ago with the intention to hold as a rental but learned my lesson to not buy houses built prior to the 80s, 70s at most. I've gone over budget not terribly but enough to where I just don't to mess with this house anymore.

So I figured this may be a good scenario to try out selling owner finance and still make a decent profit in the long term. I originally considered doing a refi and then wrap selling. But this should be much cleaner. I own it outright and do not need the cash currently.  If for whatever reason I need the cash it is my understanding that I should be able to find a buyer for the note. (Potentially)

I have never sold owner finance before, though I have bought OF and bought using a sub to strategy.

1. The house is updated/remodeled and just about ready for an occupant.
I am in the beginning stages of seeking out a buyer. I have started networking with MLOs and realtors. I also plan to put a sign in the yard with monthly payments and down payment % needed.  I initially thought that I'd be able to structure the note with a 5 year balloon but found out that unless I was selling to an investor that I was unable to do that. SO I am looking for an owner occupant and will just hold the note. 


2. I have contacted a MLO service to handle all of the paperwork/disclosures regarding dodd frank etc. Totally worth the fee in my opinion. Once I find a buyer I am to direct them to the MLO to begin "qualifying" them. Though it is my understanding that I make the final decision whether they qualify or not. 

Side note: I know a lot of people don't care and just say that if they default you foreclose and take the house back. I really don't want to have to do that. 

3. I am planning on using a standard 1-4 contract with the owner finance addendum and closing with an RE attorney that is experienced with owner finance transactions. 

4. Its my understanding that I need to direct the attorney to write in a mortgagee clause regarding the insurance. Does that sound right???

5. I plan on using a note service company to hand and direct the payments to me, taxes and insurance. 

6. Should I add a due on sale clause?

That's about all that I can think of currently. Is there anything I should add? I'm really appreciative of any feedback/critique here. 

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