Buying or Selling a Home/R.E. pressing me to owner finance my home
WE are selling a modest home in an older community, which, admittedly, has less demand than some, but the home is attractively priced and in good shape.
Our r.e. has a buyer who will not be able to obtain conventional financing for a year and wants us to owner finance until then.
What incentive will the guy have to refinance? He will have to pay closing costs again at that time and might be in for a higher mortgage.
We feel estreamly queasy at the prospect of owner financing because we could have to go through the prospect of evicting if he can't make payments of fails to obtain other financing. We don't have money to put at risk like this and need our money now. Our r.e. agent tells us we will not find another buyer and she's not willing to represent us if we don't accept. We hate to let go of this buyer, of course. Do most arrangements like this work out just fine? I have read of something called simultaneous closing, or back to back closing, in which anogher entity buys the note from us the same day. Our agent says this will result in higher rates to the buyer. Also, he will not be putting down any substantial downpayment or anything. It seems that the determination has been made between buyer and our agent that the ONLY way to go is have us do the financing. What do you know about pluses and minuses of such an arrangment, what incentive does he have to refinance? Is simultaneous closing a possible solution or will the note buyer pay us a reduced price for the house. It is already as discounted as we can possibly afford.
Thanks for your time in responding.
ANSWER: There are some very good real estate agents out there, Ginny, and this one is not one of them. I also live in a 55-and-up community and please believe me, that agent does not have your best interests at heart. While owner financing is a very good tool to help sell property, that agent is more interested in pulling down a fast commission than being concerned about your financial position. That agent is representing the buyer, and not you. Guaranteed.
In my 40-plus years as a California broker, Ginny, I have helped clients with all kinds transactions . . . including owner financing. It seems to me that you do not want to be involved. Owner financing does indeed serve a purpose and is better used by people who need their equity, whatever is left, fast.
Why? Because when you sell your mortgage shortly after the closing, you should expect to sell at a discount, one that is perhaps not to your liking. I've bought and sold plenty of mortgages during my professional career. And there really is nothing wrong with selling the mortgage at discount. After all the investor who will buy your mortgage is trying to earn a living, too. And it's quite legitimate. But the investor is looking out for his interests before yours. Guaranteed.
If you were to accept this buyer's no-down, seller financing transaction you would be leaving yourself open to potential future headaches. If you were to accept it, you should have the buyer pay you off completely within that one year. He would have a large balloon payment which means he would need to get financing elsewhere to pay you off.
And who is going to help you should that buyer not live up to making his payments on time? You should be familiar with the foreclosure process in Florida before you take that risk. And you should not need the money you would get from the sale of your home.
For the buyer to put nothing down is the worse kind of owner financing FOR THE OWNER! It is a high-risk situation. Do yourself a big favor, Ginny. Just tell that agent that you're not interested and bring in two or three top-flight real estate brokers to interview. You'll be able to tell which one is best for your situation. I do wish you well.
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QUESTION: Your answer is so good and to the point. Thank you. I don't know how to find a top flight real estate broker. Do you know how I can judge? I am in Florida, but the home is in Savannah. That's okay in terms of our dealing with and interviewing and being involved in the process. It's a very modest, slow sale type of home, but we sure need the sale.
I will do just this. I still have a contract with this real estate agent for another month, but I will start looking for the other agent. I hate to let the sale walk, but wiill never feel easy about it and will not even get the money I need anytime like soon.
Thank you so very much. I will not do this deal. P.S. It's not a 55 and up community. I wasn't clear. It is a community of older homes - lower middle-class, slow sales.
If you want, Ginny, I might be able to suggest a name or two. I won't know who they are, but I know where to ask. Just send me your email address. Otherwise, you can ask, too, just by phoning or emailing down there to a broker who might be aligned with ReMax, or Century 21, or another large company. Just make sure you are talking with a BROKER. That person is most likely either the boss or he/she knows who you should use as your agent. -- Dick Dennis, email@example.com