There’s a lot of uncertainty in the market. But you still need to consider selling. You might even be underwater on your mortgage (you owe more than it’s worth).
The fact is that with credit being tight, and budgets being small, selling a home for cash isn’t as easy as it once was.
If you are curious about owner financing or you are wondering how owner financing works, then this article is going to walk you through what you need to know.
What is owner financing?
Owner financing is simply a real estate transaction where the homeowner (you) allows the buyer to make payments on the property to you each month.
Owner financing is also known as seller financing or creative financing. But you may be wondering, “Why would I consider selling my house via owner financing?”
Owner financing helps the buyer acquire a house, and the seller to make a quick sale. It’s basically a win-win situation for both sides.
There’s a lot of cases where we buy houses from people who want to make an extra monthly income from the sale of their property.
Some homeowners want cash flow from the property, but DO NOT want to manage tenants. Selling via owner financing is a good way to accommodate that.
For example, let’s assume their house is worth $150,000 and their current monthly payment that they are making is $900 per month. They currently OWE $90,000 on their mortgage.
A typical deal will look like: we offer them $170,000 for the house even though we know it’s worth $150,000. We offer to pay them $1,100 per month at 0% interest.
(So we don’t mess with amortization, we will overpay for a property so that you can still earn extra money.)
Now, if you sell via a Realtor at $150,000, you lose $9,000 to Realtor commissions alone, leaving you to a net profit of $51,000.
$150,000 x 6% Commissions = $9,000
$150,000 – $9,000 = $141,000
$141,000 – $90,000 (mortgage payoff) = $51,000
When you sell via owner financing for $175,000 on your $150,000 home, you make more money on the sale of your home. There’s no Realtor fees, so after you pay off your loan, it’s straight profit.
$175,000 – $90,000 = $85,000
In this scenario, that’s a $34,000 difference.
How does owner financing work in Georgia?
To sell a house via owner financing in Georgia, you need to know HOW to sell the house.
1. Loan Information
The first thing to do is to figure out your loan information. We will need to know things like; loan balance, monthly payment amount, and HOA amounts (if any).
Please make sure that you get the EXACT loan balance amount. If you owe $109,35.34, then have that information ready instead of saying, “Oh, something like $110,000.”
To find this information out, simply reach out to the bank that your loan is with and ask them for the payoff amount and the monthly principal and interest payment amount.
2. Property Appraisal
Before you sell your house, you should figure out how much it’s worth. Remember, the Zillow Zestimate is not the Golden Rule for your home’s value.
Zillow Zestimate is looking at the average of homes being sold in the area. This means that they are accounting for new builds, flips, and outdated properties.
The way to find out how much your home is truly worth is to have it appraised. You can have a home appraisal done for roughly $400.
This will tell you how much your house is worth in its current condition. Having the true value of the home will enable you to ask for the right price when selling via owner financing so that you can sell it fast. This keeps you from TRYING to sell it for months.
What if you owe more than the house is worth?
We still buy houses if you owe more than the house is worth. To see how we can buy your house, fill out the form below.
3. Finding An Owner Financing Buyer
For our properties in Atlanta, we find rent-to-own tenants to purchase our homes with Facebook ads and Google ads. We spend roughly $1,000 in ads to find a qualified tenant for the property. Finding a buyer without spending money is possible though.
First, find out which type of buyer you are looking for. Do you want to sell the house to a rent-to-own tenant and manage it yourself or do you want to be completely hands-off and sell the house to an investor who specializes in buying and managing properties using creative financing?
If you want to sell via seller financing to a buyer tenant, then you need to turn to Craigslist and Facebook Marketplace. These are going to be free forums that allow you to post your property, the details about it, and the seller financing terms you’d like to sell the property with.
If you’d like to sell to an investor, there is not a huge pool of investors who are good at owner financing deals, who know the laws, and who are reliable for 5-20 years of payments to you.
You want to make sure that the investor you are working with is a reliable person who will more than likely be in business in 5 years. Otherwise, your owner financing deal will fall apart, leaving you paying the mortgage and not getting payments anymore.
Simply search for “We Buy Houses + [City]” in Google. This means that if you live in Atlanta, then search, “We Buy Houses Atlanta,” and a list of investors will show up. Find a credible company on Page 1 of the search results.
Investors that show up on this page have been in business for years. (It takes YEARS to rank #1 on Google.) This means that they are more likely to stay in business longer. Find a company you like and reach out to them and ask if they have experience doing owner financing in Georgia.
4. Working Out An Agreement
Creative financing is just that – creative. But at its core, all owner financing deals are the same. The investor is going to provide you with a down payment and you’ll get monthly payments.
At Breyer Home Buyers, we use a third-party mortgage servicing company, which means that you have more reliable payments and accounts for the owner financing payments you’re getting.
A normal owner financing deal, for us, looks like this; we come to an agreement with the homeowner on down payment amount, monthly payment amount, and years of payments.
These numbers are determined by the market, which means we are going to set something up that allows us to put a good family into the property so that your home investment is safe and more reliable.
After we have agreed to terms, we will sign an agreement. We will market the property to our rent-to-own buyers that we have in our database or by running Ads on Google.
When we find a rent-to-own buyer, we will set them up with the third party loan servicing company, which is who they will make payments to each month. (And then, the loan servicing company will make your monthly loan payments for you.)
After that, we will set up a closing date for the property and close on the house. It’s that simple.
If anything goes wrong (i.e., the tenants quit paying), then we will step in and make those payments for you. This ensures that you don’t miss a payment. Our goal is to provide you with a reliable solution in the long term.
5. Collecting the Down Payment
This is where you get cash in hand. At Breyer Home Buyers, we provide sellers with a down payment when we buy houses via owner financing in Georgia. When we close at the attorney’s office, we will provide sellers with a down payment.
You can use this down payment to pay off debts or move into another house. The down payment depends on the price and condition of the house, along with what the owner financing terms are like.
We know that when we place a rent-to-own tenant into the property, they aren’t rolling in dough. We have to make the down payment a reasonable amount to them so that their family can afford it.
The more affordable the down payment is, the more options there are on finding a good family to a place in the home. Finding the right family is key because we want them to take pride in homeownership, take care of the property, and make their payments for years.