Investor · Fort Smith, AR · Member since 2016 · 6 posts · 0 votes
Hello BP,
I am selling a house via owner financing, and I am wondering what information I should get from them before taking their down payment and closing the deal. Other than where they work and what their monthly income is, I am not sure what to ask.
Should I do a credit check? I am receiving $6,000 down on a house in Arkansas. And for my area that's quite a bit of money. I don't have to go through foreclosure if they default. I can evict, and it takes roughly 15 days in total to get them out. I figure someone interested in owner financing likely doesn't have great credit, and $6,000 should cover me for ~45 days, right? (1 month + 15 days to evict)
@Account Closed Are the buyers going to occupy the house or will they be non-owner occupied? You will need to take account of the Dodd-Frank rules. There are some summary articles on BP about Dodd-Frank, starting with this one as an intro:
@Aaron Hite If you're doing true "owner finance" and not a "lease option", if doing more then three of these within one year, you'll need to use a Mortgage Loan Originator to be Dodd Frank compliant. I would recommend using one anyway, or using a real estate attorney.
As for what to ask? There's a "Uniform Residential Loan Application", you can find it on Google, there may be a state specific version for your state. This application will show you did your due diligence to make sure the buyers could afford the payments.
You'll need more then just the application and a hand shake also to document the transaction properly, depending on how you do it, there's a few different ways, such as a Land Contract (Contract for Deed for example), Deed of Trust, Promissory Note, etc. Again, a MLO or RE Attorney can help you with this to cover your butt in case they ever default on the note. If not documented properly, and it wound up in court, you could end up having to repay all the money they paid, plus other damages, attorney fees, etc. So cover your butt!!
Also, as mentioned above if doing seller finance, you can't just evict if they don't pay, you have to foreclose and each state is different on this process. Some states it can take months and a lot of money to get someone out of the property.