Owner financed property is a great option for those of us who are unable to purchase land through traditional means (i.e. bank loans). This type of arrangement can help to meet your needs if you have a less than perfect credit score.
However, before you decide on buying owner financed property, it is important to be aware of several important items.
Our team at Santa Cruz Properties wants to make sure you are well informed about owner financed properties so that you can make the best decision when deciding on whether or not to purchase.
Keep in mind the following points to avoid any issues later down the road.
- Choose the right property for you.
Purchasing property through an owner financed contract is similar to a mortgage contract in that you can’t just change your mind about the property and ask for your money back later. If you decide you need to move for any reason, the seller will be able to keep the payments made on the property as well as the land itself. You need to be 100% sure that this is the property for you.
- Keep in mind property conditions and update costs.
It’s important to remember that property is being sold as-is. While owner financing helps you to avoid all the additional fees that get tacked on to a traditional mortgage, you can still end up paying a hefty price when trying to make changes to the land.
When coupled with building a house on the property, costs can quickly begin to exceed budgets. Some contracts may also include a balloon payment, which is when you will need to pay the remaining balance on the contract.
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- Payment history documentation is important.
Make sure to keep a paper trail of all payments made. You’ll want to keep a copy of the checks or money orders you use to make payments made on the land. Avoid using cash as a form of payment as this method is difficult to verify.
If you need to refinance at any point, the paper trail will help to prove that you were making payments on time.
- Be aware that an owner financed contract does not guarantee your credit will improve.
You might make the mistake of thinking your credit is improving during the repayment period but this isn’t always the case. Sellers may not report the payments to credit agencies and thus you might not reap any benefit.
- Really understand the terms of the contract.
Just like in any other scenario, you need to pay close attention to the terms of the contract you are signing. Some of the major components of the contract that you should pay attention to include: interest rate, who is responsible for paying property taxes, who will insure the property, the results of a late payment and related fees, the length of the contract, the due date of the balloon payment, and information regarding eviction.
- Pay attention to balloon payment due date.
While we have mentioned this one several times, it does play a huge role in your ability to acquire the land. Often, a large balloon payment must be made after five or ten years. If you haven’t been saving up adequately, you might need to take out a loan to pay this off.
If your credit is still not up-to-par at this time, it could potentially lead to some major financial issues. Don’t let your investment go to waste; save up and be certain of the balloon payment due date.
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- The property owner retains the title to the land until you have paid off the contract completely.
At Santa Cruz Properties, we work hard to ensure that you have no problems during the process of purchasing your own piece of property. But if you are attempting to buy land on your own without the proper support system, there are some important items you need to take note of.
For one, the seller of the property will retain the land title until you have paid off the debt, and this can mean issues with liens and mortgages fees. The seller is only responsible for having the title in good standing once you have fully paid the purchasing price.
Liens, past-due taxes, debts to the bank, and even partial ownership by other parties can all end up as major problems to tackle. Be aware, that if the seller still owes a mortgage on the property you purchased from them, and defaults on their payments, your contract can be rendered invalid – meaning you lose all your investment.
If you choose to go into purchasing a property without Santa Cruz Properties, you’ll want to make sure that the title is clear and the land is officially owned before signing any contracts.
- Do your homework.
Ultimately, you need to do your homework to assess any risks before signing a contract. Being informed on the condition of the property, confirming the seller has a clear title and full ownership, and getting all the official documentation recognized by the appropriate offices will help to ensure a positive outcome for you.
LET SANTA CRUZ PROPERTIES HELP TO GUIDE YOU THROUGH PROCESS OF PURCHASING OWNER FINANCED PROPERTY.
At Santa Cruz Properties, we love to make the hopes and goals of hard working individuals a reality.
Our company will help ensure that the legal aspects of the loan are properly in place. We will assess that the seller owns the land you are interested in, we will do title checks for liens against the property, and determine zoning.
At Santa Cruz Properties, your satisfaction is our priority.