Author Topic: Anybody have any experience with seller financing real estate?  (Read 2968 times)

Monkey Uncle

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Anybody have any experience with seller financing real estate?
« on: January 04, 2015, 10:06:46 AM »
Hi folks,

Do any of you have any experience with seller financing real estate?  DW and I might have an opportunity to seller-finance a piece of land that we're trying to sell.  If you have any pointers or lessons learned, I'd love to hear them.

Thanks!



Jeremy

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Re: Anybody have any experience with seller financing real estate?
« Reply #1 on: January 04, 2015, 09:41:55 PM »
I have done this

An escrow company can create all of the paperwork for you, process all of the deeds, file with the local and/or state gov't, and process escrow and mortgage payments for you

I would just call your favorite local escrow company and tell them you want to sell a property with owner financing, and have them walk you through the process

MDM

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Re: Anybody have any experience with seller financing real estate?
« Reply #2 on: January 04, 2015, 10:10:26 PM »
We have done it twice, and without an escrow company.  We had a real estate attorney draft the contract, but after that we received payment each month and all was well.

Don't have any experience with the buyer not making regular payments.

Terms are negotiable.  Decide what you want for interest rate, amortization length, and balloon/no balloon - if the other party agrees, then enjoy!

Knapptyme

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Re: Anybody have any experience with seller financing real estate?
« Reply #3 on: January 04, 2015, 11:01:00 PM »
My DW and I also stumbled into this endeavor and used a real estate attorney. It was a little scary, but like MDM posted, I have no experience with the buyers not paying their monthly mortgage. For us, the buyer, for whatever reason, wanted to avoid banks and excessive closing costs. He voluntarily did this knowing the interest rate was twice what he would have gotten from a bank. (It's 6% for a 15 year loan.)

If you go through with it, don't forget about the mortgage interest as income for tax time. I just copied an excel file for amortization purposes and email my buyer the yearly update in January.

After my experience, I would actually do it again if the opportunity arose.

MDM

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Re: Anybody have any experience with seller financing real estate?
« Reply #4 on: January 05, 2015, 12:10:54 AM »
If you go through with it, don't forget about the mortgage interest as income for tax time. I just copied an excel file for amortization purposes and email my buyer the yearly update in January.

Might also need to file a Form 1098 if an individual (vs. a company) is the buyer.

Monkey Uncle

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Re: Anybody have any experience with seller financing real estate?
« Reply #5 on: January 05, 2015, 03:54:02 AM »
Great, thanks, guys.  What did you do as far as checking credit history and the buyer's financial situation?

MDM

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Re: Anybody have any experience with seller financing real estate?
« Reply #6 on: January 05, 2015, 11:01:26 AM »
What did you do as far as checking credit history and the buyer's financial situation?
Nothing official.  In both cases we knew the buyer would use the house as one of many rental units. 

Bob W

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Re: Anybody have any experience with seller financing real estate?
« Reply #7 on: January 05, 2015, 11:30:37 AM »
We bought our house on a one sheet of paper seller finance agreement.  Worked great.  Seller required 10% down.   We did not miss a payment in 3 years.   

Seller financed at 8% interest only for a 6 or 7 year period.

He also lent us back the 10% as a draw for any improvements.   He has done this many,  many times.   I think the trick for him is the down payment skin in the game and the high interest rates.   

I would consult an attorney on raw land though.  But I would also recommend the one page approach as being straightforward and appealing to the buyer.  We closed at a title house and had a deed.  The seller retained the note. 

I was very comfortable with this methods as I have done many real estate transactions as a home builder.

If it had gone bad on his end it might have been a headache and thus the higher rate.

Remember if you are the bank that means there is a reason they can't go through a real bank. 

skunkfunk

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Re: Anybody have any experience with seller financing real estate?
« Reply #8 on: January 05, 2015, 02:05:19 PM »
My in-laws do this. Big downpayment is key - encourages them to be good. They've done a few dozen houses this way and only repossessed one of them, and that a special circumstance (cancer is a bitch.)

They generally get 7% interest these days, pretty sweet deal for the seller.

Monkey Uncle

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Re: Anybody have any experience with seller financing real estate?
« Reply #9 on: January 06, 2015, 04:33:21 AM »
Excellent, thanks for all the specifics.