What is owner financing? This is a type of sale where the owner finances their own buyer or becomes the bank. The owner will usually have similar terms to a bank for a buyer to qualify. They expect a downpayment, interest over a loan, and can also foreclose for non-payment. This is also a great way for a buyer to buy a home that may not have the best financial background on paper since the owners might be a little less stringent. Check out these 4 tips for selling your house with owner financing in New Jersey.
You will not have to wait long for an offer if you are willing to provide owner financing; however, you do have to take into consideration WHY they aren't using a traditional bank to obtain the financing. You must conduct all due diligence on your potential buyers to protect yourself and your investment. Make sure you require your potential buyer to fill out a loan application and investigate all the information provided, such as current employment and references. Also, conduct a background check and run a credit report. Do everything a traditional bank would do.
When you find your buyer, make sure you draw up a legal contract with all your agreed upon terms. Make sure you include loan term, down payment, interest rate, payment schedule and what happens if they default. You will also need a promissory note to be recorded in the county records of the property. This is how you prove that you are the mortgagee and you can foreclose if they default. It is extremely important that all of the words and phrases are legal, and that you do not forget an important part of the contract. A small mistake in the beginning might cost you a lot in the long run.
The whole owner financing process seems to be in favor of the buyer, who may not be able to obtain traditional financing through a regular bank, so why would an owner support this option? You will collect interest on the loan! Often times, you will make more money off the property selling it through owner financing than if you took the lump sum purchase price. You may be able to collect even more interest if you allow for a longer loan period. Also, if you change your mind after a while and do not want to continue to hold the loan, there are investors standing by ready to take over your note. Keep in mind, this will fully depend on the creditworthiness of the buyer and whether they have been making on-time payments or not.
A very important part of financing your own sale is the bookkeeping or “servicing” of your own loan. You need to keep track of all of the payments and when they were made, the real estate tax, insurance, any homeowners association fees, and anything else to do with the note. Hiring a 3rd party to take care of the loan servicing will save you a lot of time and possible errors in the future. You may also be able to accept multiple forms of payment this way to make it easier for your buyer to make the payments on time with a less likely chance of default. Having a professional note servicer will take a lot of liabilities off your hands and provide you with more free time to focus on what you enjoy.
March 23, 2020
By Cardwell Thaxton
If you own real estate, you have probably heard of the MLS. It is a members-only website that is joined by real estate agents in the area. They have a local level, a state level, and a national level. Joining this association designates the agent as a Realtor. They must pay to access this service.
Reason #6 to avoid the MLS when selling your New Jersey house is picking the wrong agent. There are so many agents to choose from, how are you supposed to know who to choose? Do you pick the person with the most ads? Or do you go with the guy your friend recommended, he just sold a house last week?
Reason #5 to avoid the MLS when selling your New Jersey house is the time on the market. The MLS, or multiple listing service, keeps track of how many days it’s been since you first listed it on the market. If your house ends up being on the market for more than 60 days, this is not a good sign to buyers. It may indicate that your house is not as desirable as other properties, or that there might be something wrong with it. There may not be anything wrong with your property, but this might stick in the back of the mind of potential buyers. Maybe you haven’t had a full price offer and are holding out. Whatever the reason, the time on market counter may work against you.
Reason #4 to avoid the MLS when selling your New Jersey house is highly qualified buyers. Sure, the MLS may bring you buyers, but a large portion of them will have to depend on financing from a bank, and some of them may not have even been pre-qualified yet. Your house for sale can be considered a pocket listing that will reach the desks of many highly qualified buyers, most of which can purchase 100% in cash.
Reason #3 to avoid the MLS when selling your New Jersey house is commission fees. When you list your house on the market, there are commission fees that are expected from the selling agent and the buying agent. This is usually 3% of the final sale price, which can add up to a large amount of money! If you are using an agent without using the MLS, you might be able to set a flat fee for less than traditional commission fees.
Reason #2 to avoid the MLS when selling your New Jersey house is an invasion of privacy. If your house is listed on the MLS, you will be expected to make your house available for showings. This means living in a constant state of clean and organized 24/7 until you move out. You may also be asked to leave your home on extremely short notice for a showing if possible, sometimes immediately, although you usually can schedule showings for 24 hours in advance. Some sellers find it’s easier if they move out of the home when they put their house on the market because of the hassle of showings, but would you want to be responsible for 2 house payments before you can guarantee the sale of your house?
Reason #1 to avoid the MLS when selling your New Jersey house is a sign in your yard. The yard sign is a standard part of a real estate agents advertising your house, but this also may mean that you may have people knocking on your door unexpectedly because they saw the sign in your yard. This is a huge inconvenience, especially because people may have stopped without an agent present, and who knows if they are qualified buyers?