OWNER WILL CARRY/FINANCE
Question: I am not too clear about a certain type of financing, and would > greatly appreciate if someone could clarify a few points for me:
> 1. OWNER WILL CARRY/FINANCE is being offered these days as an > extra incentive by sellers. Does it mean that they would > have the mortgage in their own names, and let the buyer > take advantage of it in case he/she/they do not have a > worthy credit-rating? 2. What exactly happens in this case? I mean, if, say, A owns > a piece of property, and agrees to carry the mortgage for > B to be able to buy it. Now, is B’s name on the mortgage > papers as well? Does he have the threat of spoiling his > credit if he misses out or is behind on payments? 3. How does the seller safeguard his interest and , at the same > time, offer a good deal to the prospective buyers?
> 4. What happens if the buyer defaults? I would greatly appreciate if someone could answer these
Answer: This means that the seller acts as a bank. Let’s say Sally is selling, Fred is buying. For whatever reason, Fred cannot secure a mortgage from a commercial lender (e.g., bad credit, not enough income, etc.). Sally can opt to give him a mortgage from “Sally’s bank”. Fred holds the mortgage in his name, his good credit is at risk. Sally is *not* a cosigner, etc. If Fred defaults, Sally can foreclose, keep all the money Fred has paid *and* keep the property as well. Sally has to follow owner-financing federal guidelines, i.e., she cannot foreclose if Fred is an hour late on a payment; he must be seriously in default. Only B’s name is on the mortgage papers. Only B’s credit is at risk. A only risks selling to an asshole who defaults *and* trashes her place before being evicted. The seller is in a very powerful position. As mentioned above, she risks only selling to an asshole. However, if she does not immediately need the large influx of money (e.g., to buy a new house, typically), the investment reward is handsome. Where else can you find a 9% rate of return on a $100,000 *guaranteed* (9% is not unreasonable; remember, the buyer is too great a risk for the commercial lenders).
Related Posts
Filed under: Bad Credit
Leave a Comment
XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>
TrackBack URL | RSS feed for comments on this post.