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1. Ask for a large downpayment. This is the most obvious way to be safe, but not always possible. The point of owner financing is to help the buyer get the property, and downpayment is one of the areas most buyers need help. 2. Ask for other security. If a buyer wants it with little down, and you like the return youll get, make it safe by putting a mortgage on other property that the buyer owns. Agree to release the mortgage when theyve paid down the balance to a certain level. 3. Credit checks. Ask them to pay for and bring you a credit report. Bad credit might be okay, but type of bad credit is important. An unpaid hospital bill theyre disputing is obviously not as relevant as their unpaid loans. 4. Use your instincts. Are you usually right about people? If so, give some weight to your judgement of your buyers character. Personally, Id trust a man who felt morally obliged to pay his debts over a playboy that happens to have decent income at the moment. 5. Look at the whole picture. Lets suppose that a bank will loan your buyer 90%, and is okay with you taking back a second mortgage for up to 5%, allowing the buyer to get in with only 5% down. If youre getting 6% more than you expected by accomodating the buyers needs, wheres the potential loss? Youre okay if he never pays, right? 6. Talk to a lawyer. In some areas it may take two years to foreclose on a mortgage through the courts, and only six months to foreclose on a contract for sale. Knowing these things can help you structure the deal in the safest way. Owner financing makes it easier to sell, and to get a higher price. You just have to be safe about it. Let a real estate lawyer review your paperwork, and use the tips here. |
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