Originally posted by @Account Closed:
Hey Bigger Pockets Community,
Hope everyone is having a great day.
Looking for advice or resources. I've read a few articles on Bigger pockets about Owner carry, and have become quite intrigued on the topic. Most articles I've read have been from Brandon Turner. They were great on why it can be so beneficial. But now i'm trying to find info on practical questions. For instance I have these kind of questions
1) Who are the people that need to be involved, I'm assuming just a lawyer?
2) When you pay the mortgage to the owner, do you also pay them the property taxes and Insurance?
3) What if there is equity in your own? Is it useless? If not, how would you acquire the equity?
4) Could you put a No Prepayment penalty in the contract?
I am a visual learner. So If I can envision every step in the process, I'll understand it in its entirety.
If you have any advice, arti
A lot of what you are about to read will only re-iterate what Mike said, but here is what I usually encounter on owner financing deals here in Florida.
1. While a Realtor is optional, a good sharp closing agent familiar with seller financing, and a real estate attorney (usually owns the title co. here) to draft the mortgage docs is a necessity. I have found 2 closing agents in my area that really know how to navigate owner financing deals well.
2. Where I am, property taxes and insurance are paid separately, by the buyer. Unless there is a wrap-around involved (whole 'nuther beast). In the contracts I write, I typically require that the buyer make the seller "lienholder" so that they will be notified if insurance lapses. I also write into my contracts that a paid receipt for the taxes is delivered to the seller in enough time (usually by March 1) that they can either pay the taxes themselves, and add it to the note or call the note due.
3. Typically, if the seller is holding the note with a balloon, buyers refinance and may at that time cash out on any equity. Not sure how this works if your note was being purchased by a private party. I typically do owner financing for investor clients, and/or sellers holding the note for regular buyers who will be refinancing thru a bank.
4. This is up to whomever is having the note drafted. I would imagine that if there is a balloon involved (most of my deals do), then there can not be a pre-payment penalty? Not sure on this-but none of the owner financing deals I have worked with have contained a pre-payment penalty.
I hope some of this is helpful, though I definitely do not warrant the information in regards to being 100% the same for Idaho. If you like, I would be happy to send you a sample of what I write into my contracts.
I'd love to hear how its done elsewhere, and I am sure there are other much more knowledgeable folks here that can explain better than I.
