If you’re thinking of selling your house using owner financing, make sure you read this blog post to learn the 6 owner financing tips for sellers in Connecticut…
There are many ways to sell your house. You could list it on the market and see what sellers will pay. You could work with a real estate buying company (like what we do here at Fair Home Offers CT, LLC) and get a fair all-cash offer, or you can consider owner financing and “be the bank” to sell your house to a buyer and collect payments over time.
Owner financing is a valuable but under-used strategy to sell your house. It’s where you offer terms to the buyer to pay you regular payments (just like a mortgage). Here are 6 owner financing tips for sellers in Connecticut…
Owner Financing Tip #1: Don’t Focus Only On Price
Price is just one component. Of course, you’ll want to find a price that is fair for both of you but there are other considerations as well (which could benefit you more than the asking price). You may even be able to “sell” your house for a lower price knowing that in the long run you will get more because of the monthly interest payments you will be receiving. Selling at a lower price with this in mind may help you get a buyer in place very quickly!
Owner Financing Tip #2: Timeline
Think about the timeline you want to be paid in. Banks might offer 5, 10, 15, 20, and 25-year mortgages. Do you want to accept payments over that period of time? Will you need your payout in a certain period of time? Even if you do, it could still be a win win for you and the buyer because the buyer may be willing to refinance in a few years with a bank and pay you the rest of your principle! Your buyer will want to find a timeline that works for them, too: they might not want to be paying you 25 years down the road! Or maybe they want to have a longer timeline. If you don’t need the equity cashed out, this may be perfectly fine for you. You will simply continue to collect interest payments for years to come.
Owner Financing Tip #3: Terms
The terms of the deal are one of the most important yet most overlooked parts of the deal. The terms might include things like how much down payment you want if there’s an early repayment penalty or a late payment penalty, and most important – how much interest you charge.
Owner Financing Tip #4: Protect Yourself
Even if you enter into an agreement with someone who is completely trustworthy, things could still go wrong – so make sure you protect yourself. For example, make sure you have insurance and the other person does as well for the various situations that could occur. And consider including a clause that retains the ownership of the house in your name until the house is fully paid. The last thing you want is for your buyer to default on payments and then have to spend money of foreclosure proceedings, potentially wiping out all of your expected income.
Owner Financing Tip #5: Build Contingencies
Most of your owner financing agreement will be built around the “ideal plan” – of what would happen if everything goes perfectly. But sometimes things happen outside of our control, so building contingencies allow you to make better decisions if the unexpected happens. For example, what if the buyer no longer wants the house, or can longer pay, or wants to pay early, or wants to use the house in a different way than expected? Or what if your circumstances change and you no longer want to sell or you need to sell even faster? Agree to the contingencies with your buyer ahead of time and the arrangement will be so much smoother.
Owner Financing Tip #6: Get An Attorney
No matter how you ultimately structure your owner financing deal, make sure you work closely with an attorney who can help you. A poorly worded agreement could end up hurting you; an attorney can help. An experienced real estate attorney will also be able to provide advice that you may not have thought of as well, potentially saving you a lot of money and headaches in the years to come!