Im a tenant and I want to buy owner financing?

Question

Hi - I currently rent from the same landlady for a long time. We have a great relationship and the home is located in an amazing neighborhood that my wife and I love. Anyways - the landlady is somewhat of a buy and hold investor having 5 properties I know of. She is way behind on property taxes even on our home that we rent. She hasn’t made any major improvements the home besides new hot water heater and central AC unit. She is a retiree. She’s about $10k behind on taxes w our house according to county tax website. She has stated her struggles with cash and real estate. We offered to possibly buy it in Dec 2018. She replied “maybe next year”. When she presented the new lease in Jan 2019, it was a lease option type of contract w no definite price or dates as most of her leases are not extremely complicated or detailed. She and I spoke about it and she said we have first dibs as she mentioned she does get many mailers about it. She doesnt seem to be in a hurry. Anyways, wife and I prob cant go the traditional bank financing route at this time but we do have excellent credit. It is definitely a property worth negotiating down in price due to better looking and updated houses in this neighborhood. An investor pal of mine mentioned doing owner financing instead. Any help structuring this would be appreciated. I think this could be a great deal for both of us.

Frank Chin · Answer

A few observations. Based on what you outlined, with her past due on property taxes, for your rental as well as others, she is in no financial shape to offer you owner financing, even if she wanted to. Sounds like she's offering you the lease with option to buy without specifying the option price. In these types of transactions, the terms of the lease is usually longer than the one year offered to typical tenants, to be safe and worthwhile, and if she verbally says you have first dibs, "the right of first refusal" should be legally  spelled out and included.

Andrew Flora · Answer

@Greg Stetz with good credit I wouldn't see why you couldn't get bank financing unless the house is way out of your budget.  FHA 3.5% down.

Nathan Gesner · Answer

Most of these conversations are just that: conversations. Until you wave money under her nose, she may not believe you are serious about buying the home or capable of doing so.

I think she's financially irresponsible so I wouldn't be interested in an owner financing situation. She's likely to cause problems down the road. I would first determine the value of the property and what I'm willing to offer. Then I would talk to a lender and see if I could qualify for a loan. If so, I would hire an attorney to draw up the offer and hand it to her with the intent of buying the home outright and separating from her.

If you insist on trying the owner financing route, I would figure out what she needs and then find a way to meet that. It sounds as if she just cares about monthly income to maintain her lifestyle without worrying about maintenance, taxes, insurance, etc. So make an offer that ensures she gets the same amount of cash every month without any of the responsibility.

Thomas S. · Answer

Take the time to contact a mortgage broker and see if there is any way for your to qualify for financing. If not then you are obviously in no financial position to actually own your own home. It is irrational to think you can afford a home of your own if you are not in a solid enough financial position to qualify for financing.

You can not own your own home yet. Move on.

Frank Chin · Answer

@William W.  Being $10k behind for a SFH here is over a year let alone owing for a number of rentals. Skipping four quarters or more of taxes is no small matter.

William W. · Answer

Her being late on the taxes doesn’t necessarily mean anything. I know people who pay their taxes at the last second, even though they have the money in the bank. I don’t get it, but some people are like that.

Joe Splitrock · Answer

@Greg Stetz I am not sure owner financing is a good option. She will need to satisfy the back taxes. If she has a loan against the property, it will be more complicated. I just wouldn't trust giving my money to someone who is years behind on taxes.

Talk to a couple banks and see what they say. You might be surprised at the load options they have for people with low credit scores.

Another thing you can do is take steps to repair your credit. There are many things you can do to clean it up and rebuild.

Dennis M. · Answer

Sounds like She’s in no position to sell and your in no position to buy ! That house can’t trade hands till that ten grand is satisfied . Are you willing to pay it plus a down payment to her ? She obviously can’t pay it or she would have paid her taxes . When you do a land contract you are entering into an agreement with the owner you essentially become partners in a way . There is an element of trust between the parties . Do you really want to partner up with an irresponsible fool who doesn’t pay her taxes and can barely manage 5 houses ? I know I wouldn’t .

Greg Stetz · Answer

Thanks. I guess I just have to see what I could qualify for. Im just concerned with our temporary income level.

Greg Stetz · Answer

Thanks.  Credit is awesome upper 700s and my wife’s is too. Just one of us working full time (me) while she is being mom for now. The one income thing.. not sure about

Im a tenant and I want to buy owner financing?

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