What is a pretty House?
A pretty house is a property that is market ready or close to market ready. What I mean by market-ready is that with minimal effort or no effort, the pretty house is move-in willing. You must turn on your utilities, move your belongings in, and start enjoying the pretty house.
Why Owner Financing?
Owner financing becomes viable when the real estate market is slowing down and home mortgages are becoming more challenging. Also, due to higher market prices and the Federal Reserve raising interest rates, many pretty houses are becoming less affordable to many buyers in the market.
What is seller financing?
There are various names, including purchase-money mortgages and owner-financing, also known as the process of real estate financing. In its most basic terms, this process defines real estate loans in which a lender also serves as a property seller. This unique situation in the real-estate-selling process eliminates the need for a bank to provide financing. After closing the sale of your property, and all or part of the sales price becomes a note back to the seller, it is considered seller financing.
10 Bold Pretty House Owner Financing Benefits
Land contract:
Land contracts are agreements between the seller and buyer to purchase a pretty house. The seller acts as the bank, financial institution, or credit union, lends the money to the buyer via a mortgage and note, and takes payments until paid in full. Typical land contracts have costs for an agreed-upon time and have a lump sum or balloon payment to the remainder of the purchase price due at the end of the term.
Lease purchase:
A lease-purchase agreement, also known as a rent-to-own contract, is an agreement between the seller and potential buyer for rent payments and the option but no obligation for the buyer to purchase the pretty house at a set price and within a defined timeline.
Mortgage Assumption:
An assumable mortgage can be defined as a seller having a current bank mortgage that has a clause in the contract with the bank that allows the seller to enable a buyer to assume the mortgage and relieve the seller from the dept. This option usually comes with a qualification process for the buyer, and the bank has the final say on its approval.
Holding the note:
Holding the note, also known as having the mortgage agreement. The seller makes a deal with the buyer to offer the owner financing for the purchase price and agrees to provide a mortgage to purchase the pretty house. This differs from a land contract is this usually involves a longer term of payments and interest until you pay the note in full with no balloon payment at the end.
Land Loan:
This type of seller financing allows a buyer to purchase a plot of land from the seller. The seller grants a land loan to facilitate the purchase of the land.
Seller Financing Pros For The Seller
Tax breaks:
The seller may pay fewer taxes on an installment sale, reporting only the income received each calendar year.
Monthly income:
When a seller offers owner financing, the buyer will be responsible for making monthly payments. This can increase the seller’s monthly cash flow, resulting in spendable revenue.
Higher interest rate :
The owner-financed loan can carry a higher interest rate than your traditional money market account or other low-risk investments.
Sell your house fast:
The time frame for selling a pretty house with owner financing is considerably faster than a traditional sale. Usually, within a few days, once you agree upon the terms.
Potential Capital Gains Savings:
When you sell your pretty houses and make a profit, there ensure capital gains. Taxes will be due on those gains. When you offer owner financing, it is possible to receive significant tax savings for the capital gains over the timeline of the seller financing term.
Disadvantages To Seller Financing
There are some potential drawbacks to offering seller financing, such as:
- There are only a few federal regulations to protect the pretty house buyer.
- The buyer is still subject to foreclosure if the seller doesn’t pay the bank holding the seller’s mortgage.
- No inspections. With most owner-finance deals, there are no inspections, which could result in the buyer paying too much for the property.
- The seller is subject to risk if the buyer defaults on the loan. If this occurs, they would have to take legal action.
Is Pretty House Seller Financing A Good Idea?
The answer to this question is a case-by-case answer only determined by the seller’s situation and reasons for selling. To a buyer, this presents an alternate loan option to a traditional bank mortgage. And to the seller, they may offer added financial benefits such as the total price of your home.
The Bottom Line
A common type of seller financing agreement, the bottom-line seller financing agreement, has pros and cons for both buyers and sellers. The contracts help buyers with weak credit scores or incomes to obtain loans that they may have been unable to afford otherwise, while the interest rate a seller can set may surpass buyers’ expectations. If you want to learn more about owner financing, contact us at EPS Houses LLC to discuss this option for selling or buying a pretty house.
