Make More Money
from Your Home by offering Owner Financing
If you are
thinking of selling a home in McAllen TX or anywhere in The Rio Grande Valley,
you can make a lot more money long term by offering owner financing than the
traditional way of selling on the open market.
A well-versed Broker/Agent like Azua Real Estate can walk
you through the process and explain the benefits and things to watch out for
when you are offering owner financing. Offering
Owner Finance IS a viable option available Even to sellers who have a loan on
the property and we can walk you through it. Selling or Buying homes aside from cash is a costly endeavor because there are many parties placing themselves in the transaction and in effect taking a cut from your asset (property) if you are the seller AND adding costs on top of the listed price for the buyer. Owner financing lets both sellers and buyers keep those costs down when done correctly. Don't let the banks and others take all the profit. Continue Reading to learn how.
Owner Financing For Sellers Pros and Considerations.
- More buyers. Owner
financing can attract more buyers including those who have difficulty
qualifying for a conventional loan such as business owners and high-income
contract workers.
- Its Faster. You can sell your home faster and easier
by offering owner financing.
- No third-party inspections, appraisals, or approvals. Buyer and
seller work together and agree on all their most important needs and wants
without the approval of outsiders.
- More profit. Owner
financing can increase your long-term profit by charging an interest rate
that is higher than conventional financing. You earn interest on the
principal balance over time.
- More flexibility and control. Owner financing can allow you to customize the
terms of the sale to your needs and preferences. You can also modify or
refinance the loan later if you and the buyer agree to do so.
- Security and protection. Owner financing will provide you security by
getting a Deed of Trust. You can foreclose on the property and take it
back if the buyer defaults on their payments with your Deed of Trust.
- Possibly no negotiation room on the price of the home. Owner financing is a much sought after benefit
and worth a premium therefore you will most likely find yourself in a position
to get the price you want if you can work with the buyer on the terms.
Considerations for Sellers offering Owner Financing
- Less liquidity. Owner
financing may limit your access to cash, as you will receive monthly
payments instead of a lump sum from the sale of your home. This opportunity
cost may affect future purchases But you could sell the promissory note if
you need to in the future.
- Due-on-sale clause risk. This is a risk that the seller’s existing
mortgage or other liens on the property have a clause that may require the
seller to pay off the debt in full if they sell or transfer the property
to another party. Full disclosure must be made to the buyers. When these transactions are done
correctly by a well-qualified and experienced Broker/Agent like Azua Real Estate, there is
very little chance of this happening.
- Legal compliance risk. Legal advice and proper documentation and
disclosure insures that the seller’s owner financing contract does not violate
any federal, state, or local laws or regulations that govern real estate
transactions, such as usury laws, consumer protection laws, or licensing
laws. Always use a qualified Broker/Agent with the proper team in place so
that this does not happen or the seller may face legal consequences such
as fines, penalties, lawsuits, or invalidation of their contract.
- Tax implications. The
seller may have to pay taxes on the interest income they receive from the
buyer’s payments. The seller may
also have to pay capital gains tax on the sale of their property, but these
are spread out over the years and in most cases are much less than having
to pay them all at once (time of sale) and understanding of the time value
of money.
- Foreclosure risk. This
is a risk that the buyer may default on their payments and the seller may
have to foreclose on the property and take it back. This can be costly and
time-consuming for the seller, there is however an upside, if the property
has appreciated in value since the original sale then you can re-sell it
at a higher price.
- Less cash up front. Owner
financing usually requires a smaller down payment than conventional
financing, as the seller wants to make their property more affordable and
attractive to buyers. This means that the seller will receive less cash
upfront from the sale of their property, which may affect their ability to
buy another property or invest in other opportunities.
How Third Parties Take Profits from You
Before offering
owner financing for their property, sellers should consult with a qualified
real estate attorney, an accountant and a well-qualified experienced
Broker/Agent like Azua Real Estate
who can help them draft a legally sound and financially beneficial contract
that protects their interests and rights as a seller.
Why Azua Real Estate? We are investor/agent brokers. We specialize in acquisition and selling of unique properties in unique situations. While most brokers offer only one way to sell your property, we specialize in many creative buying and selling techniques to fit your desired outcome when buying or selling real estate. Our team’s reach is nation wide and our professional team members include experienced real estate attorneys, title companies, insurance specialists and national institutional buyers and private lenders.
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