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Updated over 17 years ago on . Most recent reply

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7
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251
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Owner Financing Questions

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Posted

I have a property I will be selling soon and I was thinking of offering owner financing, but not having ever done that before, I thought I'd ask the following questions to get a little more insight into whether this is something I really want to do:

1. What type of deal do you typically offer? I could offer up to 100% in this case, but I'm not sure that I really want someone to take this place over with absolutely no money coming to me up front. Is it better to offer 10-20% as a second mortgage, or better to be in first position with 80-90%? What is a typical interest rate that you offer, and do you do a full 15-30 years, or just amortize over that period but have a 5 year balloon (especially on larger %). If you are just holding a second, do you amortize over a smaller period, like 5 -7 years?

2. How do you set this up? I assume a lawyer is the best way (especially for someone who hasn't done this before), but what kind of lawyer -- general real estate, title attorney, or some other kind? What kind of fees are involved and how are they typically divided between the buyer and seller?

3. My ultimate goal for the money from the sale would be a 1031 exchange into a commercial deal I'm considering, but I can do the commercial deal without selling this property if need be. How does the owner financing and the fact that I'm not getting the money right away affect the exchange? Can I offer the financing through separate funds that I have, and thus do the exchange exactly the same way as if the loan were coming from a third party (bank)?

Obviously I'll get some legal advice if I ultimately decide to do this, but I'm really trying to better understand if it is something I want to pursue. I know I've asked a lot of questions, and I appreciate any insight you might have to offer.

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