Owner Financing questions--

5 Replies

Hi all, 

I have an opportunity to work an owner finance deal for my Seller client.  We have secured a qualified buyer and both buyer and seller have come to terms (price, down payment, int rate, amortization, closing date etc) so my questions lie in the 'how to' technicalities since I've only ever done traditional.  

1) Do I need to find an 'investor friendly' title company to handle this? (We're in Austin, Texas)

2) are the taxes usually paid in the owner financing monthly mortgage payment? (seller prefers it this way so they know they are paid. and the new owner gets their own home owners insurance?

3) Will the title company prorate taxes etc like they do on a traditional transaction??  

Basically, I'm concerned about the 'how to' part of the deal.  I have the parties, the deal, and terms that are agreed on but I'm not sure of the sellers closing costs and I want to put together a net sheet so its clear.  Seller would still pay for owners title policy and doc prep I'm assuming, but since no lender is involved would an investor friendly title company have an atty draw the docs up and/or close it?

Any practical 'how to' advice or best practices is appreciated.  Or people here in Austin that I could talk to that could walk me through the process?  

1. no, if it's done correctly, there is no "investor friendly" junk about it.

2. no, usually there are no escrows since the note holder, being an individual, probably would never comply with requirements and takes on a liability that is unnecessary.

3. seller financing is a traditional process and yes, taxes will be prorated.

Can you do this safely yourself, probably not, get an attorney.

Your client? Are you a Realtor or an investor, if you are an investor, stay out of the financing area, you're not qualified, how do I know? Because you asked the above questions! Get a RMLO/attorney, this can come back and bite you years later. Good luck! :)

I met a couple of people from Texas American Title at RICH Club here in Houston, and I think they are one of a few companies doing business around Texas who are investor friendly.  check them out at www.plfpc.com

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Texas American is my preferred Title company :), so they are already on my list of who to call first thing in the morning.. they do a lot of commercial at Patton Law firm so I'm sure I'll get some questions answered and I've contacted  a RE atty as well to see what he says.  I appreciate the feedback Kathy and Bill. 

Title co should have a lawyer who can draw up the promissory deed & mortgage.

It's really a fairly simple transaction.

You have already done the hard part.

Thanks James!  I assumed so, but this business doesn't do so well on assumptions :) so I'm dotting i's and crossing t's to be sure all is above board and humbly acknowledging that I don't know what I don't know since I'm in unchartered territory for myself.  

Appreciate it!