America is experiencing a profound housing shortage, not just here in Eugene and Springfield Oregon.…
Are you looking at homes for sale in Eugene, but your financial situation doesn’t fit into the neat little banker boxes available from a lender? Maybe you’re a seller who’s motivated to distinguish your home from all the others in order to close faster? The benefits of seller financing can be attractive to buyers and sellers alike, and there’s no better time than now to consider all the options. Homes for sale in Eugene are ripe for the benefits of owner financing.
Reasons a buyer might consider approaching a seller about financing include:
- Less than perfect credit
- Unpredictable salary
- Unstable work history
- Shorter loan terms
- Faster closing process
- Lower closing costs
- Flexible down payments and monthly payments
Sellers may want to market financing to buyers for:
- Fast closing process
- Obtain higher price for your home
- Tax Savings
- Attract more interested buyers
- Higher interest rate
- Monthly income
Seller financing is currently an uncommon practice, but both the seller and the buyer will find it a very useful tool, especially in tight real estate markets. Sellers who are willing to consider financing represent a very small percentage of all homes sold, typically less than 10%. This leaves a big field open to creative buyers and sellers who can work together for great mutual benefit.
There are many options available for seller financing:
Land Contract Once quite popular in the 70’s and 80’s, land contracts are starting to make a comeback, and with good reason. If marketed correctly, the seller can create a large pool of buyers and by doing so, can sell the property more quickly. Without a typical lender involved, the loan application process will not hold up the sale. Higher selling prices and higher interest rates are also motivation to consider financing your buyer. A down payment, monthly payments, and a balloon payment at the end of the contract make an attractive option to many sellers.
For buyers, no mortgage qualification means that more people can buy their own home. Folks with imperfect credit, or those with unpredictable income, such as salespeople, can still qualify for a home. Buyers don’t receive the deed to the home until they’ve paid for it in full. They earn an equitable title that entitles them to the equity built in the home while it was under contract. Making timely payments under a land contract improves your credit and that improves your chance of obtaining a loan.
All-Inclusive Trust Deeds Also known as wraparound mortgages, this type of seller financing consolidates one or more mortgages into one document, and preserves the security interests of each lender. Instead of taking out a loan for the entire price of the home, the buyer obtains a loan for the difference in the sale price and the remaining balance on the seller’s loan. The buyer also takes over mortgage payments. The benefits to the buyer is a smaller loan amount and taking over the seller’s loan could mean a smaller interest rate. Perks for the seller are making the home available to more buyers and selling it at a higher price.
Junior Mortgage Conventionally known as a second mortgage, a junior loan helps a buyer who is unable to qualify for a loan for the full value of the home. It can be used for down payment or to make up the full selling price. This type of loan is a useful tool for both parties. In tight markets, a seller may make this option available to close on the house quickly. Buyers benefit by not immediately having to furnish the full selling price of the home, possibly buying time for credit improvement.
Assumable Mortgage With the lender’s approval, the buyer can take the seller’s place on some types of mortgages. One big advantage to the seller is their equity must be paid upfront at the time the loan is assumed. An assumable loan may be an enticing perk to a buyer, allowing the seller to request more for the home. Buyers can avoid qualifying for new loans in some cases, and also eliminate closing costs.
There are many other options available for seller financing. Professional help is advised in all circumstances, on both sides of the sale, to protect all parties. Real estate agents and brokers, and attorneys should be consulted to help create the legal documents and satisfy state and local regulations.
Tips For Seller Financing
- Sellers should insist on a loan application. Thoroughly verify all information provided. Credit checks, employment checks, reference checks, and review of required financial documents and assets should be done personally by the seller or someone who is working on behalf of the seller.
- Sellers should require that they are allowed to make all final credit-worthy determinations before the written sales contract is approved.
- Any loans made should be secured by the home in order to protect the seller in the case of default on the loan.
- Sellers should request a down payment. It gives them a cushion in case of default, and it also makes the buyer a vested party with some “skin in the game.”
- All parties should negotiate for their best terms. Review local interest rates and terms and consider all options when writing up the contract.
- Most sellers don’t require a loan origination fee, or points, to be paid up front in a seller financed transaction
- Consider hiring a servicing company to help with the paperwork burden and to draw up the mortgage and other legal papers.
- Use the escrow company as a payment center, for a very small monthly fee, to record the mortgage payments and disburse the funds to the seller.
If you’re a buyer, look around for seller-financed homes in Eugene. You can talk to your real estate agent or check out craigslist.com or other ads to find listings. If you find a home you like but it’s not listed as seller- financed, ask! Many homeowners and also many realtors are not well-versed in seller financing, so do some research. Come prepared and be ready to help educate everyone!