Owner Financing Info/Advice Needed

[Curt Davis]

So my wife and I have moved out of our old home about 3 months ago and sadly we are still the owners of that old home so needless to say I am paying 2 mortgages ( not fun ).  

I have an agent who brought me their clients who want to do owner financing. My HOA doesnt allow for normal rentals or leases so offering owner financing I think is the work around for that. I am currently asking $489,900 for the home. Value is in the $650k range.

Here is what they want to offer:  $489k price, 3% closing cost assistance, $5k non refundable down payment, 36 month lease with payments yr 1 $2,850 yr2 $2,950  yr3 $3,000.  

My major concern is the down payment.  Normally on a half million dollar home I would think to get at least $25k down.  Having actual owner financing in place, if they dont execute the terms at the end or they try to flake out and I have to evict them it will ruin their credit.  

Anyone have any additional suggestions for my situation?  I would rather sell it out right but sadly no actual offers yet.  

Thanks

[Darrell Shepherd]

A few things, what you describe is a lease option, not owner financing, your HOA will probably still have a problem with it if they looked at it. True owner financing will transfer ownership.

This deal sucks for you.  You should be getting a premium for owner financing it, not taking this kind of beating.  If you are willing to owner finance it, Market it that way- put an ad in Craigslist that says something like:

Owner Finance Luxury Home

Easy Qualify owner finance this great executive home!  House has blah blah blah, in a great neighborhood with top quality schools blah blah blah.

Owner finance with only 5% down!!  NO BANKS.

You can list out the basics of your terms, but I'd hit it for full value or close to it and work from there.

There are plenty of people out there that make real money that cant get a loan because they are self employed and hide income and such.  I couldn't qualify for a mortgage right now.

A few things on what you are doing.   By discounting it that much people in that price range generally don't thing "what a deal!"  they think "whats wrong with it?"  They also may be searching $500/600k and up and missing yours entirely because they are trying to target their ego.

You have become a motivated seller.  I dont know your financial state, but I went broke paying mortgages on empty houses (a lot more than $500k worth), so I feel ya.  Still gotta look at your risk, though.   That $5k down payment disappears if they skip a payment and you have to evict, and I'm guessing painting a $500k house in Memphis would run you that- what happens if you have to replace the carpet or some cabinets?   I've done 1% lease options trying to stop the bleeding and they almost always came back to bite me in the ***.

If you can afford it, I'd say market it right and see what happens.  Its a smaller market in that price range, but I'd still think the owner finance angle will get you some interest pretty quick.

If it were me and I was considering this, I'd say I needed more down payment, but could finance it in, then bump their payment.  You also want to drive by where they are living now and see if they live clean or will trash your place.  

Are you sure of your value? If so, I wouldn't sell at these terms until you marketed it a higher price with O/F. If there's a glut of $600k houses in Memphis, that may not be your true value. Anwyay, if you make them easy to buy they will be easy to sell...