Newbie - Seller Financing questions
Hi, JF here. I'm a newbie and need some advice re:seller financing.
I have a former primary residence in a Top School District in NJ that I own free and clear (no mortgage). I've been renting out this property for several years and had various tenants. I am considering negotiating a seller financing agreement with the current tenants. The tenants (and potential buyers) are wealthy folks but get their income from abroad and wish to stay and raise their 3 children (7-10-15 year-old) in the US in a top school district. So this is so far a good match for us, as landlords.
Few questions in regards to seller financing:
1- I have a Realtor with whom I have been working for years with this rental, and who would normally be involved with a traditional sale. With Seller financing (SF) however, what would be the role of the Realtor, and what would be a fair compensation for the Realtor in case I proceed with SF?
2- There are a lot of resources on SF but it is a bit overwhelming, Can you recommend someone experienced in seller financing deals that I could consult with, to help me think about all the aspects?
3- The fact that the buyer does not have their income in the US is a risk that I am fully aware of. However, the way I'm thinking about it is that if they fail to pay the mortgage, I'll get the house back so in my mind that mitigates the risk. Am I being too simplistic/naive here?
Thanks for the advice.
Hey JF!
I work heavily in Seller Financing... have done 4 deals using it in the last 18 months. Though state to state rules for how transactions work may differ, I would be happy to share some knowledge with you on how you can make a deal work for you and continue to provide you passive income for a little while!
In Texas, regardless of where the buyer earns their income we are allowed to check their credit, income, and funds to ensure we have proper due diligence on the buyer.
Feel free to reach out anytime, I am all over BP or on social media and respond to all of the messages I get.
- Karl
#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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- Austin, TX
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#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
- Investor
- Austin, TX
If you have no clue how to work a owner finance deal use your realtor (if they know how to write up and oversee a seller finance transaction). Pace Morby has a lot of content on this topic. You will get the house back in your name if they don't pay, after a foreclosure.
@Jean-Francois T. ask your realtor and see if they have any experience, in it and see what they would charge. 3% commission is over the top for doing paperwork since you have buyer and seller lined up. Or reach out to a title company or lawyer who handles closing in your state and see if they have experience in seller finance, and ability to handle long term escrow.
The thing about creative finance it has to work for you. What may work for someone else may not be good for you. Figure out what best fits you and roll with it.
Check out your local laws on how foreclosure works and or if you can do contract for deed etc...
Sounds like you are not rushed for time so I would be smart and move accordingly.
Cheers!
Curious as to how Realtors fit into the process of purchasing via Seller Financing as well (though I'm not looking at a deal at the moment- call it "Morbid Curiosity" for the time being ;-)
Thank you guys for the responses!
@Chris Davidson - Chris, when you mention to 'check local laws', do you mean local laws of the state where I live (CA) or the state where the property is located (NJ) ?
(resending with proper tag) @Chris Davidson - when you mention to 'check local laws', do you mean local laws of the state where I live (CA) or the state where the property is located (NJ) ?
In Portugal we have many clients which buy the plot, develop Architecture project and submit in Municipality to approve.
We develop 3D real images and sell.
Construction take around 9 to 12 months, and usually final client get better price than ready house to move in.
The demand it’s so high, this kind of projects, when have good location, stay only few weeks in market.
But our reality can be different of other countries.
Quote from @Eliott Elias:
If you have no clue how to work a owner finance deal use your realtor (if they know how to write up and oversee a seller finance transaction). Pace Morby has a lot of content on this topic. You will get the house back in your name if they don't pay, after a foreclosure.
True, but an important clarification: after FORECLOSING, which is a much gnarlier pathway than evicting.
You might consider doing a lease-purchase-option with these folks, giving them a nice long runway of time to figure out how to qualify for traditional financing. This keeps the title with you until they purchase and then if they found themselves not paying they would find themselves being evicted instead of foreclosed upon.
Quote from @Jean-Francois T.:
(resending with proper tag) @Chris Davidson - when you mention to 'check local laws', do you mean local laws of the state where I live (CA) or the state where the property is located (NJ) ?
Where you are investing. Where you live will only add to taxes, but where the property is located is the laws need to be more concerned with.