Owner Financing

[Tyler J.]

I have been reading more and more about this and am trying to get a better grip on understanding it.

As a seller, how does it work when someone offers you seller financing proposal? Who writes up the paperwork? I read on numerous posts a lawyer can, but if you want to yourself you can? I also read that the title company will take care of it?

How do the mortgage terms work? I know they vary. Is something common a 30 year rate and a balloon payment after 3-5 years? Or sooner I guess it could be.

Thanks in advance.

[Jon Holdman]

As the seller, you want to have your attorney draft the paperwork and make sure the terms are legitimate. This is NOT a place to scrimp on a few hundred for an attorney. At this point, you should assume the loan will default and you will have to foreclose. Hopefully that won't happen, but if it doesn't, you have to be prepared for it.

Also be aware of the SAFE act, which may come into play.

Terms can be whatever you and the buyer agree to. You would be a very rare seller if you agreed to a fixed rate, 30 year loan at anything approaching bank rates (4-ish%). A balloon after a few years will get you paid off sooner than a fully amortized loan.

Do the transaction at a title company. Buy a owners policy for the buyer and have them buy you a lender's policy. Get everything done properly and recorded.