Selling with owner financing help

[Jered Lafuze]

Situation: A friend is selling a house in Wilmington North Carolina. He has an offer but the buyer wants him do owner financing. She offered $25k down and wants him to carry the financing at 4%. Pay $1100 per month for 72 months. Then pay remained of balance with accrued interest. Purchase price being $250000 Any advice at all will help. Thoughts on the offer? Questions he should ask to buyer? Who he should be looking to for closing documents? Insurance? Thank you in advance!

[Andrew Postell]

@Jered Lafuze there's a lot of different view points on what you are trying to do but let's tackle the easy stuff first. On all my owner financed transactions I pull credit, analyze DTI, down payment, make sure the note is recorded on title, and have myself listed as the mortgagee on the insurance policy....just as a lender would. All of these items protect you as a lender and some of them even protect the buyer. The title company can assist with some of these steps but if some of the things I just described don't sound familiar to you then please get with a lender or another investor mentor type of a person on how to structure your loan. I would also be familiar with the foreclosure process in your state. Now for the interest rate, how much interest are you earning from your bank? Is it even 1%? Probably not. I've seen all sorts of types of owner financing and the interest rates vary greatly. But the conventional loan rate to expect right now is 5% on a 30 year loan. If the person seeking this loan is qualified why not just go get 5%? Chances are they are not qualified, which means that the risk is higher. If the risk is higher then the interest rate should be higher. Again, I've seen owner financed deals at 2% and even 0% before. But my philosophy is to charge a higher rate. So it just depends on what your friend thinks is important. Hope this post helps. Thanks!