4 Tips For Selling Your House With Owner Financing In San Antonio

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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.

Selling your house with owner financing can create a win-win situation for both the seller and the buyer. The seller may not need or want one lump-sum payment and would prefer to receive monthly payments in order to defer some of the tax implications and create a monthly income stream. Many buyers are completely capable of making their monthly payments but have not yet set themselves up to qualify for a loan from a bank. Check out these 4 tips for selling your house with owner financing in San Antonio.

Tip #1: Check Buyer Qualifications

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.

There are many people who just don’t have any credit because they do not get loans and typically pay for items without using credit cards. This is much different than a potential buyer who has bad credit because they have done things that have negatively affected their credit.

Tip #2: Make it Legal

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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. 

Most states have standard forms that can be used to facilitate the process and if you are not comfortable completing these yourself a licensed real estate attorney can help you prepare these documents.

Tip #3: Owner Perks

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! Oftentimes, 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. 

Tip #4: Collect like a Pro

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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.

Note servicers can also collect and escrow for taxes and insurance so that you do not have to worry about escrows. Overall, 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.

Call Sell My San Antonio House at (210) 201-6644 or send us a message to discuss these and other tips for selling your house with owner financing in San Antonio.

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