If you’re thinking of selling using owner financing, make sure to check out this blog post to learn the 5 owner financing tips for home sellers in Atlanta…
There are many ways to sell your house. You could list it on the market and see what sellers will pay. You could work with a company (like us here at Homeowner Help Today) and get a fair all-cash offer, or you can consider owner financing and essentially “be the bank” to sell your house to a buyer.
How Owner Financing Works
Owner financing (also often called “seller financing”) can be a valuable strategy to sell your house. Let’s quickly discuss how it works before we jump into some tips.
As I mentioned, you are basically acting as a bank or a lender for your buyer. You have a home to sell, you own it outright, and you offer it to a potential buyer “on terms”.
These terms can be whatever you want: down payment, payment time period, interest percentage, monthly payments – whatever you negotiate is on the table. Then you sign over the legal documents with your new buyer and you’re all set!
Why would someone do this? I’ll discuss this at length in another article, but there are a few reasons that you might consider this:
- It’s a great way to get a monthly check (like with a rental property but with fewer responsibilities)
- You may be able to sell your house for more money this way
- You have greater flexibility over the terms that you provide
- You can often help people buy a home who won’t qualify for a traditional loan
Ok, let’s dive in. Here are 5 owner financing tips for home sellers in Atlanta
Owner Financing Tip #1: Don’t Focus Soley On Price
This is what trips up most people when trying to sell their house by owner-financing.
Almost everybody asks too much, and then their house doesn’t sell.
You will have to find a price that works for both parties, of course, but successful owner-financers make price a secondary component.
The terms – interest & monthly payments, are where your focus should be.
If you structure the terms correctly, you’ll get a good price in the long run.
Owner Financing Tip #2: Consider Your Timeline
Most traditional mortgages are spread out over 15 or 30 year time periods, but you can make this timeline whatever you want.
I’ve heard of someone who set something up for 18 years because the buyer wanted to own the house free and clear to pay for his newborn daughter’s college tuition.
Think about your goals. Many owner financers offer timelines anywhere from 1-10 years.
The longer you hold it, the more money you will make in the long run (because of interest – this is why banks like a 30-year timeline), but the more risk you take by holding the note longer.
How can you owner finance with a note for only a few years? Many owner financers use a “balloon payment” at the end of their term to be paid in full. I’ll go over an example below.
Owner Financing Tip #3: Offer The Best Terms
The terms include the down payment, interest percentage, and repayment period. I recommend you work backward and come up with what works for both you and your buyer.
Think about how much of a monthly payment you want and then adjust the other terms. If you want $600 a month, and your house is worth $175,000, then you can come up with terms using a mortgage calculator.
A few other items to consider are early repayment penalty, and late or non-payment considerations.
Let’s look at an example:
Let’s say you have a condo worth $150,000 that you want to sell using owner-financing. You want a monthly payment of around $500 a month for 10 years, with a balloon payment at the end. You ask for a 10% down payment. You and your buyer have also negotiated an interest rate of 2%, and you amortize the loan over 30 years. Your terms would look like this:
- Price: $150,000
- Down payment: $15,000
- Term: 10 years (or 120 months)
- Payment: ~ $500 per month for 120 months
- Interest: 2%
This would result in a monthly payment of $498.99 for 120 months with a balloon payment of $98,636.63 due at 120 months.
How did I come up with those results? I used a loan calculator app on my phone. There are also several loan amortization calculators online.
Owner Financing Tip #4: Protect Yourself With a Good Attorney
You’ll need a real estate attorney to draw up your contracts and make sure that you are protected.
Ask around for a good real estate attorney and ask them how many owner financing deals they have done over the last year so you can get a good gauge of their experience.
Things do go wrong sometimes, and you want things to go as smoothly as possible if your buyer is unable to make their monthly payments.
Make sure you get a good attorney and a good contract for that peace of mind.
Owner Financing Tip #5: Build Contingencies
Contingencies are discussion points around what to do should you or your buyer veer off the plan as specified in the contract.
Say you have a contract for a $700 monthly payment for 36 months with a $140,000 balloon payment after 36 months.
What if the buyer wants to extend the contract after 36 months? Or what if they want to pay it off earlier? Or what if you want to sell it and be out of the deal before 36 months?
These are all things that you can discuss and work on as they come up, but it makes life a LOT easier to think of these things ahead of time, discuss them, and have them written into your original purchase and sales agreement.
Thinking About Selling Your House?
If you’re thinking of selling and are exploring your options, consider selling directly to us! If you don’t want to go through the hassle and headache of selling then we can help!
Call our team at (404) 500-8094 or fill out the form and we’ll give you a fair all-cash offer on your house.