Owner Financing Sellers Protect Yourself with Deed in Lieu of Foreclosure

If you own a house free and clear, then you are an ideal seller to consider carrying the mortgage for the buyer. Essentially, you become the bank for the buyer and you’ll likely be able to sell the house quicker because getting qualified for conventional financing takes considerable time and paperwork.

With you being willing to finance the property for the buyer, you call the shots. If you want 20% down, ask for it. If you want to move it quicker and feel comfortable, you could lower that down payment to 10% or even lower. You’re in the driver’s seat. In fact, you can be as flexible or creative as you want.

Reasons You Would Want to Seller Finance a Home:

  1. You have control of the deal
  2. No waiting for loans that fall through after a lot of time has been invested in a deal
  3. You can make more money from the deal
  4. You can sell the home much faster
  5. You greatly increase the size of your market

Drawbacks of Owner Financing Real Estate for Buyers:

  1. The buyer could pay inconsistently and create stress for you
  2. The buyer could default
  3. The purchaser could not only default but also damage the property
  4. Foreclosure takes time and you could lose some money in the process
  5. The process of getting the house back could be emotionally stressful

The most common method of getting total control of your house again after someone defaults on an owner financed property is most typically called foreclosure. You have to follow you local laws to carry out a foreclosure properly and it usually takes a few months. Every location has similar laws in concept, but you have to follow the laws according to where the house is located. Consult a legal professional for details.

Creative Solution to Avoid the Foreclosure Process: Deed in Lieu of Foreclosure

Say the whole idea of going through all the proper steps of foreclosing on a buyer that doesn’t live up to the payment agreement, you have the legal power of foreclosure. Of course you could foreclose as most uneducated investment drones do, but there is a much faster way to get control of the property with little stress. In fact, the technique is so powerful and so simple, you might be surprised this option may be available to you.

Usually buyers of owner financed houses are more eager than people that go through the lengthy process of getting pre-qualified to buy a home because just the thought of applying for a commercial bank loan exhausts them or maybe they don’t have the best credit because of a divorce or other hardship. It doesn’t mean they won’t be ideal buyers, it just means they might be even more grateful that you’re offering to carry the note and mortgage rather than a cold institution. So, up front, explain that in case of default, you won’t be using foreclosure, but rather you’ll have a neutral party, usually a lawyer, hold the deed for you protection. If the buyer doesn’t pay, the lawyer can file the deed and you have your house back quickly in your control. It’s much faster than pursuing a foreclosure.


Always consult a qualified attorney, this post is simply to stimulate ideas.


How to Find Owner Financed Properties

You can buy a house and go the conventional route using a real estate agent to find the property and show the property, then going to a conventional lender like a commercial bank then submitting yourself to all the reams of papers to fill out and if they say ‘jump’, you’ll need to say, ‘how high’.

Good news, there is a market where many things can be done on a handshake, rather than having to qualify for commercial lending. There are many down to earth owners that own land, farms and residential houses free and clear. They can finance the property based on a hunch or whatever criteria they decide on. Usually, they are much more lenient than going to a bank. These owners are in the minority, but they can change your life if you have bad credit or just want less hassles while purchasing real estate.

Many FSBO (for sale by owner) properties are offered by salt of the earth people that live below their means and therefore, they can offer to become your private bank. If you can get one that likes you and is very flexible so that they are willing to carry the note for 10, 15 or 30 years, you may have struck gold. Many of them will make a decision if you are credit-worth just by talking to you and their own belief in the gut feeling and intuition.

Other owner financed homes have an owner willing to carry the loan for 1 to 5 years, but they are looking for someone to qualify for conventional financing after a window of time. Just be vigilant and find the right kind of seller for your needs.

Do searches for FSBO properties, for sale by owner homes, owner will carry, lease option, rent to own, lease to own, lease with option to buy and option subject to the existing financing.

If you are a seller and wish to learn how to carry the mortgage for your buyers, your home will likely sell faster, but you should educate yourself on the best ways to do so and consult a real estate lawyer to protect yourself. You can also visit create real estate investing sites and see what’s working for other sellers.

If you are a buyer, you could be rewarded for seeking out the perfect fit for you and buy a home without ever subjecting yourself to a formal credit check and the stacks of forms you have to fill out to get a bank mortgage. You could find a seller that might even give you more of a grace period to make your payments if you hit a rough spot.

Do you still want a conventional loan? Watch the video below to aggressively look for commercial financing.