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Dutchess_III's avatar

Can you give me some owner-carry advice?

Asked by Dutchess_III (41570points) February 3rd, 2015

MOST OF THIS POST CONSISTS OF A CONTRACT SO DON’T FREAK OUT AND “TL/DNR!!!”

My husband seems fond of the idea (with us being the ones doing the carrying) but I’ve always been dead set against it.

We have some property, 5 acres, no house, we’re selling for $35,000. Showed it to a couple this morning. They asked if we would do an owner carry. I reconsidered my resistance to the idea when they said they’d put $17K as down payment. They asked if we’d “wait” for the rest. She’s expecting a settlement from a car accident. I didn’t talk to them myself, my husband did, so I have yet find out if the settlement is a sure deal, or if it is still pending.

$17K would pay off the mortgage as well as another loan which would free us up considerably.

I found the following contract on line. Need to tweak it to fit our needs, but I have a few questions.

♥ Do we need to get it appraised, or can I just take that part out?

♥ Also, I added the word “Non refundable” to the down payment. Is that valid?

♥ How do I go about getting an actual sales contract?

*****************************************************
Here is the contract:

Owner Financing Mortgage Contract

This agreement is entered into on the __________ day of __________________,

20____ between __________________________________________ (hereinafter

“Owner”) and _____________________________________________ (hereinafter

“Buyer”) for the sale of the property located at
_____________________________________________________ (hereinafter

“property”).

At all times the laws of the state in which the property is located govern this contract.

This contract is not a sale contract for the property. A separate sale contract for the

property must be entered into and executed according to the laws of the state in which

the property is located.

Loan Terms

This contract establishes that Owner shall sell and Buyer shall buy the property and

that Owner shall finance the balance of the purchase price for the property for Buyer

after Buyer delivers a non-refundable down payment.

The purchase price of the property is ______________________, as agreed to by the

parties to this contract. This amount was agreed to after an appraisal of the property,

which occurred on _________________________ and was conducted by

_________________________________.

Buyer is/is not (circle one) obtaining financing for any portion of the purchase price of

the property from a third party, such as a bank.

Buyer must notify Owner of the amount of financing obtained from any third party and

provide the name and contact information of the third party within 30 days of obtaining

such financing.
The down payment amount of _________________ has been agreed to by the parties

and is to be delivered no later than __________________________, 20_____. Failure

to provide this down payment nullifies this contract in its entirety.

The amount that Owner will finance for Buyer for the sale of the property is

_____________________(hereinafter “Owner finance”).

Owner shall carry the promissory note for the entire mortgage term for the amount

identified as Owner finance. Buyer has submitted a mortgage application to obtain

this financing and Owner has approved Buyer’s finances.

Financing for the mortgage is to last for a period of _________________ and carries an

interest rate of ________________. This interest rate is/is not (circle one) flexible

according to the mortgage rate index chosen by the parties. The parties have chosen

______________________ as the mortgage rate index to govern this contract. Any

changes to interest rate can be made solely by the Owner , but must be provided in

writing no less than ________ days prior to the change coming into effect.

Payment for the mortgage is due monthly in the amount of ______________________.

This amount does/does not (circle one) include taxes, insurance, and legal, state, and

other fees associated with owning the property. Should this amount include these fees

and should these fees change due to changes in rates being set by the governing party,

such as the state tax authority, the parties will notify each other of any changes that are

brought to their attention within 30 days.

Prepayment of all or a portion of the financing extended to Buyer is allowed and carries

no penalties.

This agreement is secured by the home. Buyer’s failure to pay the mortgage payment

when due as described above entitles Owner to initiate foreclosure proceedings as
allowed by state against Buyer.

Owner has the right to repossess the proper ty after the conclusion of foreclosure

proceedings, as outlined and permitted by the laws of the state in which the property is

located.

Loan Servicing Owner will/will not (circle one) hire a loan servicing company to draw up

the mortgage documents and handle the processing of payments. The selection of the

servicing company is solely at the discretion of the Owner.

Any fees charged by the chosen company for servicing the loan will be handled directly

by the Owner.

Owner reserves the right to hire a servicing company at any time. Notification of the

choice of servicing company will be provided to the Buyer no later than 30 days before

payment should be sent to the servicing company.

Owner may change servicing companies at any time without giving prior notice to

Buyer. However, Owner must notify Buyer or have the new servicing company notify

Buyer of any changes to choice of loan servicing company at least 30 days prior to the

change in mailing address for monthly payment. Any fees incurred due to the Owner’s

failure to provide Buyer with notice, either directly or from the service company, and the

Buyer’s sending payment to the incorrect address shall be paid by Owner.

This contract is full in its entirety. Any additions must be made in writing and amended

to this contract.

Entered into this __________ day of ________________________, 20_____.

_____________________________________________
Buyer
______________________________________________
Owner
Notarized or executed according to governing state law this ______________ day of
____________________, 20____.

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30 Answers

talljasperman's avatar

Sell them half of the house. Then let them mortgage the rest to pay you off.

Dutchess_III's avatar

There is no house. They plan to pay us in full with her settlement.

My three specific questions were:

♥ Do we need to get it appraised, or can I just take that part out?

♥ Also, I added the word “Non refundable” to the down payment. Is that valid?

♥ How do I go about getting an actual sales contract?

Tropical_Willie's avatar

Get a lawyer! You may find out all you get $17K, no property and headaches.
Hold the closing in the lawyer’s office and pay the fee to the lawyer out of the $17K. Maybe only $400 or $500.

Dutchess_III's avatar

Good Idea @Tropical_Willie. Really good idea. But obviously we would retain the title until it’s paid. Then we could turn around and sell it again to someone else and come out $17,000 ahead.

Tropical_Willie's avatar

Only if you can get them off the property.

The lawyer can include a clause for anything, ask for a free sit down with the lawyer.

Dutchess_III's avatar

I sent her an email. Thanks.

Judi's avatar

Insist on running a credit check. Also, depending on where you live, I would still use an escrow officer. In some areas I might say to insist on using an attorney depending on the custom in your area. Is it customary in your area to use an attorney to close a real estate transaction?

Dutchess_III's avatar

Well, it’s customary to go through real estate agents.

Tropical_Willie's avatar

Real estate agent is to finds a buyer/seller. The lawyer draws up the contract to complete the transfer. Two different things, both are part of transferring property.

Dutchess_III's avatar

Thank you for clarifying. I wonder if we should go through an agent.

Tropical_Willie's avatar

If you go to an agent now; make sure you have a clean shot for no agency fees, if you sell to the current prospect. It would mean 6% of the sales price so it would be $1020 on top of the $17K. So an agent would need to sell at $18020 or more to make it worth your while.

Dutchess_III's avatar

Well, the total would be $35,000. It would save us the $400 legal fee too.
Don’t know what to do!

Tropical_Willie's avatar

You still need the legal fees; the agent handles only the property finder part of transfer and contract for transferring is handled by the lawyer.

An appraisal would be part of real estate agent’s actions but the usually charged separately for that. The agent would also qualify any buyers.

Dutchess_III's avatar

If they don’t ask for an appraisal do I have to get one?

Tropical_Willie's avatar

Check www.Zillow.com or your taxes for the property.

josie's avatar

I was going to suggest a Kimber Ultra Carry II
Then I read the details

Dutchess_III's avatar

Check my taxes for the appraisal @Tropical_Willie?

Tropical_Willie's avatar

Yep, it will ballpark the value not the retail but if what the government think it is worth. If they are taxing you for $50K, then maybe an issue on selling to the current $35K.

Buttonstc's avatar

@josie

FWIW I also thought this was a gun question prior to reading details :)

Judi's avatar

@Dutchess_III, you don’t need to pay an agent. You just need an escrow officer or an attorney, whichever is used in your area. In California Attorneys are rarely used in real estate transactions but I have heard that in some states on the east coast they are almost always used. I don’t know about your state though.

Dutchess_III's avatar

I would prefer an attorney just so I can have my p’s n q’s dotted. Or whatever.

I just spoke to the gal myself. She asked if we’d sell without the tractor. I said yes, so that reduced it to $28,000. She’s offering $18,000 down (which would pay off much of our nagging debt, including the land) then offering $100 a month to pay off the last $10,000….at that rate it would take 8 years. And that’s without interest.

Please feel free to check my math. And advice!

Dutchess_III's avatar

Just made an appt with my attorney for 2:00 Tuesday.

Judi's avatar

Are you going to have the buyer split the attorney’s fees?

Dutchess_III's avatar

No. It was my idea, not hers. Besides, I’ll probably be charging her some interest.

Judi's avatar

Like I said, I don’t know your area but my experience is that closing costs (which this is, and should be reported to whoever does your taxes) are usually shared.

Dutchess_III's avatar

I know closing costs are, but why do we need closing costs if we’re selling it ourselves?

Dutchess_III's avatar

I’m trying to remember….I don’t recall any closing costs on the land when we bought it.

Judi's avatar

Closing costs include the preparation of a trust deed or mortgage and an escrow account to hold the down payment money until the transaction closes. It might also include credit check fees. It looks like you’re attorney to do most of this.

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