Let’s talk about the ins and outs of owner finance homes in South Carolina…
Home prices are great in Upstate South Carolina, interest rates are low and many buyers are out looking today. But some potential buyers are finding the banks are not always easy to deal with. And many sellers become frustrated when buyers want the home but cannot get financing.
So some sellers are taking matters into their own hands.
Real estate has not been moving like it did several years ago but it is not completely dead. As a matter of fact, my company has seen a tremendous amount of activity compared to last year already.
But some buyers and sellers are frustrated with the banks because they feel that the banks are not lending. They are, but lending standards are tighter now than in the past. So some sellers and many buyer are looking at owner financing as a way to make a home sell.
This strategy was popular more than 20 years ago and is making a comeback in today’s market.
The seller and buyer must agree to the terms, including the amount and length of the loan along with the interest rate. The deals are typically short-term, up to three to five years. It is common practice to put 10% down, base the payments on a 30 year loan but have a balloon payment in 2 to 5 years.
Owner finance is not for everyone.
There are real risks, so the way the contract is worded is very important. The buyer and seller must make sure that both are protected and that if there was any problem with the loan, that it is very clear as to what is going to happen.
It goes without saying that sellers should do their homework and check out a buyers credit reports before signing a deal.
Not many sellers can afford to wait on their money, and many buyers have such banged up credit that not many sellers will be willing to take a chance on them. It is essential that the buyer has enough money to put down that the seller will feel confident that the buyer is not going to go bad on the loan.
How Much Down Payment Do You Need?
If you only have the same amount of money to put down that a renter would put down when they sign a lease, it ain’t gonna happen! Why would the owner sell for the same amount of money down that they could rent the property for? Especially when the costs to foreclose if they owner financed will be much higher and take longer than a simple eviction for nonpayment of rent.
If a buyer has a good down payment, good income, stable employment and not too bad credit, then it might be possible.
Read that last sentence again and pay attention to the words IF and might.
In general, the buyer is going to need at least 10% of the purchase price to put down. The seller is going to charge a higher interest rate than the banks would. But it can work, and both the buyer and seller can win when owner finance deals are done correctly.