Selling Your Texas House in Todays Market

Owner financing is a lot like “tie-die” it comes in and out of fashion depending on the decade.

Prior to today, last week or even last year, had you ever thought about buying or selling an owner financed home in Austin? Probably not.  A few years ago anyone with a pulse could get a bank loan and most any seller could get rid of an unwanted property.  However, back in the early 80’s when interest rates were in the double digits and lending was tight, guess how people bought homes??? With something called “owner financing”.

As an individual that has specialized in owner financing for more than 8 years, its been interesting to watch the tide swing my way.  8 years ago when I spoke with Realtors about helping them sell their listings with owner financing, they looked at me like I had three eyes and antennas coming out of my head.  Even just a few years ago I received the same response “why in the world would anyone want to sell with owner financing?”

Today every realtor I meet is happy to meet me and very anxious to hear about how my owner financing program can help them sell more homes and help their buyers close on a home.

Would you be surprised to learn that realtors and the property they own are my biggest clients? Realtors today know how challenging the market is.  They know 90% of families can’t qualify for a bank loan and with buyers that do get “pre-approved” there is a huge possibility the buyers won’t actually close.  Why not you ask?  These days most buyers can’t stand up to the scrutiny banks put them through.

As with all difficult moments in life there is a silver lining.  Owner financing is a tried, true (and legal) method that can serve the needs of sellers that need to sell and buyers that want to buy.    Additionally, since only the most responsible and credit worthy buyers can qualify these days, it is setting a new standard for fiscal responsibility.  Even though its a painful process, in the end if we as American’s get better about paying our bills on time and borrowing less debt, that can only help all of us in the future.

If you’ve been researching seller financing I’m guessing you’re one of three people:

• buyer interested in purchasing an owner financed home in Austin or other city
• seller trying to figure out if seller financing is a option for getting rid of a house  (click here and tell me more about your house  then I’ll give you a call to discuss)
• realtor looking for options to help your client.

The good news is, I can help no matter which category you fall into.  Not even sure if owner financing is right for you?  If you’re local to the Austin area I know this market well and can give you the pros and cons of pursuing a owner finance solution.  Just send me a quick note via the Contact Us page on this blog and we’ll chat.  If we’re a good fit, great I’m confident you’ll be pleased with the services I provide.  If not, I can give you some alternatives to consider.

Wishing you happiness and health.

Wow, don’t sound so worried…. Maybe, just maybe, it might the solution you’ve been wishing, hoping or praying for.

While some people will tell you “oh my gosh, don’t let someone take over your payments”  I’d be confident betting one million dollars that person has NEVER followed by saying “there’s no need to worry, I’ll make your payments until the house sells”.

I spent a lot of money recently ($350 per hour) to have my attorney spend his time and my hard earned money to put into writing his legal opinion on “letting someone take over my payments.”  And guess what, he told me what I already knew, but didn’t have in writing, in plain English, from a real estate attorney.  There is nothing illegal about letting someone take over my payments, your payments or anyone’s payments.

Does every loan contain a “due on sale” clause that says if the current owner of the property sells or otherwise transfers ownership the bank can immediately say “I want all my money”.  Yup they do.   And if you don’t give them all their money when they ask for it.  Their only option is to foreclose.

Now how many of you out there, think a bank who is receiving their payments (who cares who’s name is on the check), would want to foreclose.   Countrywide went out of business because it foreclosed on too many people.   Banks don’t make money foreclosing on properties.  They make money by taking in monthly payments.  And if Jessica sends in a payment, for Fred.  Bank of America (the company who swallowed Countrywide) is not really going to care.

Because I paid a lot of money for my attorney’s legal opinion, I don’t share it here in detail.  For anyone who may need to sell and letting someone take over their payments is a consideration.  If you talk with me, I’m more than happy to share the legal opinion with you, once we’ve developed our personal relationship.  I’m also more than happy to provide you with the name of my attorney as well.

In case you’re wondering.  What would happen if the bank called the loan due.  You just transfer the property back to the original seller to make the bank happy and draft different legal documents to protect any investment made by the buyer of the property.  In 25 years of practicing real estate law my attorney said he’s seen the banks call the loan due one time.

So if you can’t make the payments or the vacant house payments (or high payments) are killing you…. there is a 100% guarantee it will go to foreclosure,  wipe out your savings or you’ll have to get a 2nd job just to make your payments.

Versus a .000000001% chance the lender MIGHT call the loan due if you let someone take over the payments.

When someone tells you “oh my gosh, don’t let someone take over your payments”, I recommend saying “OK, will you go ahead and make my payments while we wait for the house to sell”.  If they say yes, I highly recommend you take their advice and their money.

I’ve worked with a lot of families lately who wanted to take advantage of buying a spectacular deal but didn’t want to give away the farm just to sell.  Hugely discounted deals sell even in this tough market but do you want to give away $10,000 – $20,000 in equity just to compete with HUD foreclosure and Bank REO property prices?

Ty & Brandi, a family I worked with a year or so ago… they didn’t “need to” buy that fabulously brand new home that was cheaper than its been in 20 years.  But it was their dream home that they could finally afford.  They could actually afford to leave their old property vacant while it tried to sell… and their friend told them “don’t let someone take over your payments”.

But Ty, he loves Excel, and he punched all the numbers into Excel.  How much equity he was walking into by buying his dream home at such a discount.  How much money he’d save by not having ANY vacant house payments.  The number of months it would take for the vacant house to wipe out their savings.  And Excel totaled it all up and for him it was worth that .000001% chance the lender might asked to be paid in full.  And a year and a half later, we’re still making Ty’s payments on time, every month.  If we end up working together, ask me for Ty’s number, he’d be happy to provide a reference.

If you’ve got a property anywhere in the Austin area and you’re thinking about selling.  Talk to me.  I buy and sell in this market every day.  If you want to go the listing route, Joseph Rios is the realtor on our team.  If  listing doesn’t work, we can always discuss other options and most likely letting us take over your payment may be one of them.  And it doesn’t hurt to have options does it?  The better you understand your options, the better you’ll feel about your choice.

Wishing you and yours a wonderful week.

Realtors are awesome and I’m not just saying that because my sister’s one.  Realtors can bring a lot of value to the selling process if they have a wide range of tools in their tool belt.

A few years ago, all it took to sell a house was to stick a sign in the yard, put it on the MLS and wait for the phone to ring.  Anyone could be a realtor in that kind of market.

Today’s realtors, at least the successful ones, will bring to you a wide range of skills, strategies and a game plan that should include:
1.    Plan A
2.    Plan B……  AND
3.    Plan C

The days of just sticking a sign in the yard and hoping sells are long gone.  Sure to come back some day, but with an 18 year market cycle and us at the tail end of 18 years.  Its going to take at least 10 to 12 years before selling starts to get that easy again.

Unless of course you’re selling the property at a discount.  Great deals can always be sold.  But if you bought you home anytime in the last few years.  Or refinanced an older home and pulled most of your equity out.  There is a good chance you owe close to what your home is worth.  Especially when you take into account all the fees and costs associated with using a realtor.

I personally am not a realtor, so when I find someone that wants to sell (if they don’t want to sell quickly the investor way), I refer them to my realtor and good friend Joseph Rios.  Jospeh is a great realtor.  He’s professional, knowledgeable and has a tool belt full of selling techniques.  Joseph’s been around Austin for many years and knows this market well.  If you want or need to sell, you can sit down with Joseph and he can provide you with several options that will look something like this:

• Analysis using the standard realtor sale.  He’ll determine what the market value is and give you an idea of who your competition is.  From there you’ll get a good idea of what its going to take to sell.  What price, what incentives you’ll have to use (aka pay buyer closing costs, repair credits, buyer agent bonuses, etc.).  And what you’ll potentially walk away with at closing.
• If you don’t have the equity or time for such a solution.  Joseph and I will get  together to provide options for selling with owner financing.  By owner financing the home to a new buyer you will eliminate many of the costs associated with selling through the traditional realtor market.
• If you’re really upside down, there is always the short sale route.  This is where you offer the bank less than what you owe.  There are some definite pit falls to this option, but its better than no option at all.  Find my article on the pros and cons of short sales in our archives here.
• Renting it out is always an option, not one of my favorites for many reasons (read my article on pros and cons of renting) but hey its an option and in this market having more than one option is key.
• And the best part, you can work with both Joseph and I at the same time.  He can market the traditional realtor route and have the investor option as a plan B, and then a short sale option (or renting, or something else) as Plan C.  By having multiple plans in place, you’ll have flexibility and options.

What you don’t want to hear from a realtor is “the only way to sell is to list it”.  Or the only way to do it is to “short sale it”  or the only way to do it is “xxx”  there is always more than one way.  And Joseph and I collectively have over 2,500 buyers in our buying database.  And finding the perfect family for your property is something we’re experts at.

If you choose to have Joseph sell your house.  He can list, then work the owner financing route and get the short sale paperwork lined up in case Plan A or Plan B don’t work.   Or he’ll come up with some other customized plan to meet your needs.

So to Realtor or Not to Realtor – that was the question???  My answer:  Definitely, just pick one who has lots of options for you!  Don’t settle for someone who tells you what you want to hear.  Make them provide proof of recent sales when they tell you “definitely we can sell for the price you want” ask them to prove it to you.  It only makes your house look worse when its sat on the market for several weeks or months, then it starts dropping in price as your realtor gets real with you.  That just makes you look desperate and when the sharks smell blood they come running.

If the idea of having a bunch of strangers show up on your doorstep at all days and times of week doesn’t appeal to you.  Or for any other reason the realtor route, doesn’t appeal to you.  Then you can work directly with me.  I can work with no equity, big equity or little equity all day long.  Its not about your equity, its about how soon you  need a solution.  No one wants the bank to take their equity whether it be big or small.  Working with my team at Common Ground Properties can make that happen.

Happy Selling!

http://www.WeBuyHouses512.com

Pros & Cons of a Short Sale

Well first – what the heck is a short sale?

Per WikiPedia:

In a short sale, the bank or mortgage lender agrees to discount a loan balance because of an economic or financial hardship on the part of the mortgagor. This negotiation is all done through communication with a bank’s loss mitigation or workout department. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market and the borrower’s financial situation.

For realtors and family members.  If a property can’t be sold the traditional way, the only option they know next is trying to sell it on a short sale.  Doesn’t mean its your only option, but if its something your considering, here are some pros and cons of going the short sale route….

PRO’s

• If foreclosure is looming and you’ve exhausted all other options.  Definitely a short sale is a better than a foreclosure.   Per RealtyTrac, 2008 was a tough year for us.  There were 861,664 foreclosures throughout this country.  That’s a lot of properties and a lot of families affected by foreclosure.    Foreclosure will have a huge impact on your credit score. Plus the lender takes a huge hit too.  So both parties win when a short sale can be negotiated.

CON’s

• There is no guarantee that your lender will accept a short sale.  You can put it on the market, try and sell it, not pay any payments while its going through the process and “hope” they say OK.  If not, you’ll be that much closer to the foreclosure auction.
• If your sale does go through, it affects your entire neighborhood.  You’re reduced price now sets the new market value for the neighborhood.  If you have family in the neighborhood or own other property in the neighborhood, you’re setting a new “low” market price.
• You could end up owing the bank the difference.  If you own any other kind of asset (the bank has access to your credit report you know) the bank can say “sure we’ll accept the short sale” and let’s say they take a $30,000 loss.  They can simply sue you for that $30,000 short.  Now in Texas, if you own a primary residence (let’s say you did the short sale on an investment property) they can’t force you to sell your homestead in order to pay for the judgement.  They’d simply wait it out until you sold to collect their money.
• If they don’t sue you for the difference, they could 1099 you.  Meaning they will report it to the IRS as income.  Now if you were in serious financial trouble and can prove that to the IRS, then the IRS may waive that income.  But what if you short sale in January 2010 and get back on your feet in 2010.  When you file your taxes for 2010, you won’t be able to claim “poverty” to the IRS and you’ll end up increasing your taxable income.  Depending on where you are on the income scale, you could lose benefits, pay a higher tax rate and all those other ugly little penalties the IRS imposes when you make more money.

When it’s the only way, a short sale is a good way to go.  However you do have other options.  I bought a house from Leigh & Levi.  When I met them their house had been on the market vacant for 1 year.  Their realtors (who were not making the vacant house payments for them) kept reducing the price.  To a point where Leigh and Levi would have had to bring over $20,000 to the closing table to sell.  It was at that point the realtor said “your only other option is a short sale or just let it go to foreclosure”  they were seriously deciding on which way to go when they met me.  I was able to help them get out from under that vacant house payment in 2 months.  And they’ve had a great night sleep ever since.

So if someone is telling you “your only other option is a short sale or just let it go to foreclosure”, talk to me.  Many times realtors and well meaning family members and simply telling you what they know.  They are not buying and selling experts like we are here at Common Ground Properties.  And we don’t charge anything for giving our opinion.  We believe in giving back.  We don’t have to buy every house and sometimes we can’t help.  But at least after you’ve spoken with one of us, you’ll truly know all your options.

Wishing you all the best.

http://www.WeBuyHouses512.com

For over 8 years I’ve been helping families sell their house when they get into financial trouble.  And for the last 3 years as the credit market has gotten worse I’ve worked with tons of  families looking to buy an owner financed home in Austin TX area.    Recently I’ve heard a lot of the same “its going to be cash from here on out” that’s a nice thought and a plan I have myself.  But unfortunately the world does operate on credit and banks want to know you responsibly know how to use credit.  I found this great article online when I was looking up some information on credit… thought you all could benefit from it.

Article courtesy of  the Credit Matters Blog:   http://www.CreditMattersBlog.com

It’s my hope that this story makes you a more thoughtful consumer of credit.

You’re shopping at Gap, buying some blouses, shorts, and skirts. You get to the checkout line. The cashier, just as you’re whipping out your debit or credit card, asks if you’d like to apply for a new Gap store card. You’re told that you’ll save 20% (today) on your purchases. Without giving it a second thought, you jump on it. Sound familiar? This happens all over America — every day. You’ve heard of impulse shoppers. Say hello to impulse credit applicants.

I have a friend, a real sweetheart, who told me her story. She said that she had been, until meeting me, a real sucker for store-card pitches at the register. She’d apply for the card, get approved, make the purchase, bag the 20% discount (or whatever the deal du jour was at the time), and then be on her way.

Her story horrified me. Not so much because she was applying for all of these store cards (which was bad enough) but because of what she was doing afterward. Instead of allowing these store cards to age, she was running home — after the purchase — and canceling the account. How many times did this happen? Somewhere north of five times but less than ten times. (Excuse me while I catch my breath.) After hearing her story, I calmly told her to stop doing that. She agreed; she’s now reformed. On top of that, she’s made some really smart credit decisions since then. She’s become a successful CreditMattersBlog.com graduate in short order.

Still, I think her story is an interesting one. What’s more, it gives me a chance to discuss the virtues of having a credit plan. Attaining credit — and maintaining it — should be done with purpose. Before I started accumulating credit cards, I sat down and thought about my goals (both short term and longer term). I knew that I wanted to get my scores higher, which has been accomplished, and I knew that I wanted to get my utilization rates down (by getting high-limit cards). Those were short-term goals. Longer term, I wanted to get some cards that would reward me for using them. I also knew that I wanted to establish some good credit relationships — with creditors that were well respected for different things.

Off to the Internet I went. It was there that I found creditboards.com, a site dedicated to all things credit. The real gem of the site, though, is the forum section. There, regular people discuss all kinds of credit issues. Want to know which credit-card companies consistently offer the highest limits? Which companies have the best customer service? Is there any way to get my APR reduced? What should I do about the low limit on my credit card? If you could have just one credit card, which would it be? I found answers to all of those questions. It was now time to put my plan into action.

After figuring out which creditors offered the highest limits, I made a short list of the creditors I was interested in doing business with. I ultimately chose Pentagon Federal Credit Union, NASA Federal Credit Union, USAA, Nordstrom, and Bank of America. Having figured out who I wanted to do business with, based solely on my desire to get high limits, I needed to find out which credit reports these companies pulled. After all, if they all pulled Experian, I’d run the risk of being denied toward the tail end of my list (because of too many credit inquiries). Once I figured all of this stuff out, I was positioned to make an intelligent decision about my applications.

Because I already had some inquiries on my Experian report, I wanted to limit the amount of applications that would require a credit pull from there. I figured that Bank of America was worth the inquiry. As for my Equifax report, I had very few inquiries there. As a result, I didn’t mind adding a few more. Pentagon Federal (a perennial Equifax puller) and NASA made the cut. Nordstrom, which is very sensitive to inquiries, would have to wait. Ditto USAA.

Having narrowed down my choices, I pulled the trigger on my applications. I hit paydirt with all of them. Pentagon and NASA granted me significant credit limits. Bank of America, meanwhile, offered me a solid limit, though not as solid as the ones I got from Pentagon or NASA. Still, I was pleased. It was nice to see my game plan unfold the way I hoped it would. I ultimately parlayed those high-limit cards and used them as leverage with my other creditors (who no doubt felt compelled to offer me limits that were competitive). Higher limits beget higher limits. Don’t ever forget that.

Over time, I have added more cards to my stable. Nordstrom, which has its own bank, USAA, Merrill + (underwritten by Bank of America), American Express, and Saks Fifth Avenue (the Mastercard) are all now part of my credit portfolio. None of the cards were added without a reason. Nordstrom offers the best customer service around. Period. Merrill Lynch provides great customer service and a huge credit limit (up to $250,000). USAA, though I don’t use the card as much now, provided a fat credit limit that I used in my higher-limits-beget-higher-limits strategy. The Saks Fifth Avenue Mastercard, meanwhile, has some great benefits (rewards). Additionally, the application was of the dual-card variety. You can apply for both the Saks store card and the Mastercard in one application — with just one credit inquiry (sweet!). I recently added an American Express card to my portfolio because of its customer-service reputation (so far, customer service has been excellent).

To be sure, a good plan should also include a credit-card spreadsheet, which is used to keep track of your portfolio’s every move.

My point in laying all of this out is simple: it’s smart to have a credit plan. New accounts have a deleterious impact on your credit score (length of credit history accounts for 15% of your FICO score). Each new card lowers the average age of your credit history. That’s why I was hoping to offset some of that impact by getting high-limit cards that would help my utilization ratios. Utilization accounts for 30% of your FICO score. I liked the trade off. And I liked my plan.

To this day I don’t do anything in my credit life without first checking to see how it fits into my plan.

If you’re smart — and I know you are — you’ll do the same

****************************************

http://www.WeBuyHouses512.com

The Loan Modification Outlet – did a great job of explaining the pros and cons of a loan modification…  They charge for their service, we don’t make any money referring them, and we don’t recommend or not recommend their services… they just did a great job of explaining it all in detail.  Enjoy!

A loan modification is a mutual agreement by the lender and the borrower to change in the terms of the loan so that the loan is more affordable to the borrower over the long term, so the borrower can stay in their home. A true loan modification is a permanent solution that serves the best interests of the investor who owns the loan as well as the homeowner. It’s not supposed to be a short-term solution like a repayment plan or forbearance.

Loan modifications are not refinances. They are simply renegotiations of the terms of an existing loan, so the qualification process is not the same as it is for a refinance. Some say you don’t need an appraisal, but it’s best to get one especially in light of declining home values. An appraisal can help you convince the lender that it’s in their best interest to take your loan modification proposal, especially if your house has decreased in value.

No two loan modifications are the same. They depend on a variety of circumstances and can consist of a reduction in the interest rate, a change from fully amortized to interest only payments for 5 to 7 years, a freeze on interest rates for 5 to 7 years, an extension of the loan term, a reduction of the principal balance of the loan, and a resolution of any arrearages (usually by adding them to the loan balance). This article discusses some of the pros and cons of loan modifications.

Loan modifications are time-consuming.

Typically, your lender will make you wait 30-45 days before your ARM is up in order to even submit an application. And, just because you submit an application does not mean you’ll qualify for a loan modification. Loan modifications take a long time to complete, and you may end up falling even further behind on your payments. This could seriously increase the threat of foreclosure and disqualify you from a loan modification. If the lender feels they will take too big a loss, they won’t approve your proposal.

Fixed Rate Mortgage versus Flexible Rate Mortgage

Most people know what a fixed rate mortgage is: a type of mortgage where you need to pay a fixed interest rate each month to pay off your home loan for a specified period. Flexible rate mortgages, also known as adjustable rate mortgages (ARMs) have rates that change according to the money market conditions. Getting a loan modification will not necessarily change your ARM to a fixed rate mortgage. The terms may only change to where your rates freeze for an extended period of time or you end up temporarily paying interest only. Then, you’re subject to whatever money market conditions prevail when your rates get ready to reset.

FHA may be a good option if you don’t qualify for a loan modification.

Loan modifications will require that you have a high debt to income (DTI) ratio. This is why it is important to get an appraisal on your home. It could have declined enough in value for you to qualify. However, if you don’t qualify because your DTI isn’t high enough, you may want to consider a FHA loan.

With a FHA home loan, not much equity is needed. It’s also a fixed rate mortgage with low interest rates. But, the cons are mortgage insurance. FHA charges an upfront mortgage insurance premium plus a monthly premium. A loan modification wouldn’t require that.

Loan modification companies tend to charge high fees.

If at all possible speak with your lender first. If they are unresponsive or are otherwise unable to help, seek legal counsel with a real estate attorney that specializes in loan modifications. You’ll have to pay the attorney fees, but at least you’ll know for certain that the attorney will represent your best interests. And, the attorney may be able to find unexplained fees charged in your loan, Truth in Lending Act (TILA) violations or RESPA violations, which could provide a valuable bargaining chip in your negotiations–both in qualifying for the loan modification and in how much you end up paying. If your rights as a borrower were violated when you were refinancing, consider contacting lawyers that specialize in predatory lending abuse.

In Conclusion

Most lenders do not want to lose your money, so they will generally work with you. But, you have to be proactive in contacting them and be persistent. Do not wait until the last minute. The quicker you contact them and explain your circumstances, the quicker you can get your application under way. Try to lock in an interest rate before your rates increase. Loan modifications are a good option, and you could save your home from foreclosure. If you are having difficulty with your lender, contact us. We may be able to help.

Best of Luck!

Thanks for taking the next step and at least checking out my blog.  You’ll find a lot of information on here about the options you have to sell your house.

On the top menu you have a couple of choices:

- Just Call Jessica

- Let’s Talk About Your House

Over the last 8 years I’ve honestly and ethically helped hundreds of families deal with their real estate challenges.  Please give me the opportunity to help you, what have you got lose?  Contact me today!

Being a professional house buyer, I meet a lot of folks along the way who are trying to decide is it better to sell or rent a house?  Of course the answer is it all depends.

Here are some thoughts to consider.

• Can you sell it right now?  Most likely the answer is yes.  In order to actually sell it, you may need to consider some alternative methods. Such as:
• Regular Realtor Sale… you’ll have to figure out what your home is worth.  You can sometimes get an idea just by asking yourself “how much did my neighbours house sell for”…  if it was a quick home sale (and you don’t need to sell quick) you probably don’t have to estimate that low.  But realistically other people in your neighborhood that have had their property on the market may need a quick home sale which will affect how much you can sell yours for.  Now you can call a realtor, but if you don’t use a reputable realtor, often they will just tell you what you want to hear about sales price just to get the listing.  Then once its been on the market and not many people have shown up, they’ll start to break the news to you that you need to lower your price.  So do your own research, get a general idea, then deduct 6% for realtor commission, 1% to 3% for closing costs and figure you’ll pay some buyer closing costs to sell it (buyers are in the drivers seat these days).
• A Short Sale – have the bank accept less than what you owe.  Will that impact your credit, your future… yes, but we started this discussion by asking is it better to sell or rent a house….   So depending on how you sell, there could be some repercussions.  And a short sale comes with a long list of negatives… but it is a way to get it sold.
• Selling with owner financing.  Which would allow someone to take over your payments.  If you’re thinking about renting… then selling with owner financing should be a definitely consideration… Why?  Well lets discuss some things to consider when renting.

Renting Pros

• When you rent it out, you still get all the interest deductions of your income tax.  You get to use depreciation to reduce more of your taxable income.
• If you’re in an area where real estate has not been super over inflated and in an area that’s not been experiencing a high rate of foreclosure.  Then you could experience appreciation and the home could be worth more in the next few years.  As with everything in life, what goes down, must go up.  Eventually the real estate market will come back.
• Potentially passive income.  We all dream about checks just arriving in our mail box without having to actually go out and work for the money.  That is what rentals can do for you.  Many people work 20 or 30 years to retire with a small pension.  If in that same time period, you just bought 2 or 3 houses.  Let the tenant pay them off over the next 30 years.  You’d end up with 3 houses that sent you money each month and would be worth a lot more than you paid for them.  If your mortgage is not too high, you could get a little money each through passive income.
• Build up of equity through mortgage pay day.  The longer you have a mortgage, the more each of your payments goes towards principal.  So as the tenant pays you, more and more of your mortgage gets paid off and it builds up your equity.

Renting Cons:

• Tenants, Toilets and late night calls. And if you’re here in the Austin area… negative cash flow.  That’s where monthly its actually costs money to keep a renter in there…
• When you’re considering renting, go online to craigslist, pull out a newspaper, call the for rent signs in your neighborhood.  That will give you a good idea of what you can rent it for.  Then you’ll need to calculate costs to pay a management company (typically 8% to 10% of the monthly rent)  and some reserves for repairs.  Because when their kid throws a toy into the toilet, or two entire rolls of toilet paper, they will call you and say “the toilet just stopped working, I have no idea what happened”
• Then the costs of repairs after they move out, yuck… and if they left on not such good terms, you could be in for some major damage.  You could get lucky and find a tenant who cares about a piece of property they don’t own.  But its always better to budge for what’s coming.

If you’re not in a position to cover repairs, negative monthly cash flow and selling through the regular realtor process.  Then definitely consider going the owner financing route.  If you’ve got a home in the Austin area that you want to sell, need a quick home sale or need cash for houses and have thought about renting it to get a quick solution…. but don’t want to deal with the cons I’ve listed above, consider selling to us with owner financing.  Leaving your mortgage in place.  You’re payment will get covered 100%, you’ll have responsibility for repairs and you’ll end up with a family in the home that has an ownership interest in the home.  When their kids draw with crayons on the wall, they’ll care.  When their teenage parks on the grass, they’ll care.  It will be their home and they’ll have a vested interest in making sure it stays nice.  What does a renter have invested in your property?  Maybe one months security deposit?

There are pros and cons to each option.  If I can lend my advice for your specific situation, please just ask. I’ll be happy to give my many years of experience of being a landlord (I used to own over 200 rental units) and at the same time I sell some of my properties outright and sell many with owner financing and have done so for many years.   So my opinion is backed by lots and lots of experience.  Some of it very painful.  You can listen to the advice of your neighbor, your realtor friend and your family members.  Just make sure to ask them what their advice is based on.  How many properties have they rented?  How many have they sold (of their own)?  How many of their own have they sold with owner financing?  Then call me and we’ll brainstorm together on what could be the best solution!

Wishing you and your family all the best.

If you’re thinking of selling a home with owner financing in Austin, you may hear about something called the due on sale clause.  You’ve found yourself reading this article because the other options you’ve been presented with are not very appealing.  Most realtors and sellers find themselves with two options for selling an unwanted house:

• keep dropping the price, which can result in your $10,000 to $20,000 of equity just being thrown out the window
• or rent it out

Many realtors (or your friends and family) today without hesitation will suggest, “if you can’t sell, just lease it out”… yet those same folks don’t sit down and list all of the ridiculous reasons landlords have been sued and LOST millions over.  Renting has been around forever and the risks of being a landlord are just an acceptable risk verses the reward of not making vacant house payments or not letting the home go to foreclosure.

Because those same people are unfamiliar with owner financing as a selling option will say don’t do owner financing its too risky…. Oh really?

• Can the buyer living in the owner financed home sue the seller (aka you)?  Nope – not if you construct the transactions the way I do it.
• If the buyer’s dog bites the neighbor kid or the UPS guy, can the injured person sue the seller who provided the owner financing?  Nope.
• If the buyer does something stupid, can he sue the seller who owner financed him the home?  Nope.

Yet if you substitute tenant and landlord instead of buyer and seller in the above questions.  The answer becomes yes to everyone.  In every one of those scenarios the landlord can be sued, has been sued and has lost.

I have searched the Internet top to bottom and have yet to find a lawsuits pertaining to violation of the due on sale clause.  You’ll find lots of articles from others saying… oh my gosh don’t violate the due on sale clause…. But not one family that has ever lost a home due to the due on sale clause (please email me the link if you do find one)

What most people don’t realize is how risky being a landlord can be.  A 10 year study finalized in 1998 showed that Landlords/Property Managers/Apartment Complexes were the MOST sued business in the United States.  Granted only 50% of the landlords lost.  But how much did it costs those landlords in time and legally fees to “win” the battle?

The Due on Sale Clause has been around for decades.  Can you please find me lawsuits where sellers have lost millions due to its enforcement.  I can’t find them… can you???

Here are some of the keyword phrases I’ve searched for (using quotes so it looks for the phrase)

• help I owner financed my home and bank called my loan due
• called my loan due
• bank says I violated the due on sale clause
• enforcement of due on sale clause

Then I did a quick search on “landlord sued by tenant” and found over 86,000 results… here are just a few highlights:

• tenant sues for 270,000 and it becomes a six year lawsuit
• Rapist tenant sues landlord from jail and wins
• Man drinks 15 beers and 12 shots of hard alcohol.  Falls, sues landlord and wins 24 million (seriously!!)

There were so many I only picked the first few….

With the due on sale clause, the bank can ask you to pay off the loan “IF” they choose to enforce it.   Odds of them enforcing it?

• Slim to none (read my other article on due on sale clauses for reasons why).

The Odds a tenant may sue you:

• Huge.  And the costs can be so much greater than what the due on sale clause would ever be.

If you’re looking to legally and safely buy or sell an owner financed home in Austin or any other surrounding city.  Send me an email jessica@sellmytexashouse.com and I’d be happy to help answer any questions you may have.

Wishing you health and happiness.