What Are My Risks Buying a Home Traditionally Vs. Using Owner Financing?

To learn more about owner financing and other creative financing strategies visit www.ownerfinancehomestore.com

Hi daniel in here i’m co-owner of home auctions made easy and author of home by and successful in allah i wanted to continue our video series and talk to you today about the differences between a traditional home transaction and buying the home using owner financing strategies so again we’re going to go back to our little white board here and we’re going to talk

About buying home using traditional financing the first thing you’re going to do is get some type of pre-qualification letter our pre-approval from a lender that could be a bank or a mortgage broker and then when you enter into a contract and find a home you’re going to have some type of option period now it depends on the state that you’re in exactly how that

Works but your option period is going to allow you to do a home inspection and do any other due diligence on the property or the area neighborhood that you’re in itself and then you have your title insurance and title commit with your going to want to review your survey hoa and appraisal now some of you may know how to review all of these things home inspections

You know how to do your due diligence you know how to reach out o commitment surveys hoas appraisals but i would say ninety percent of buyers don’t know how to do this and all of this by itself not exactly something that you should probably go into without having an expert on your side guiding you showing you how to read these things showing you what you should be

Looking out for what’s not right what is right what’s good what’s bad and how to protect yourself now let’s go ahead and go into the owner finance transaction because not only you still have all of this but you have all of this extra stuff too and this is why i wanted to make this video i would never advise anybody to buy a home without having an expert at their

Side to explain everything and just show them what everything means i would never ever go into an owner finance home transaction without having an expert by my side if i wouldn’t do this i certainly wouldn’t do this so let’s go ahead and go into what is a part of notre finance transaction that’s not a part of a traditional home transaction so first is the type of

Transaction again i hope you watch the earlier videos if you did that you know that there are rent-to-own there’s lease purchase there’s equity holding trucks there’s wraparound mortgage assignments so you want to understand what type of transaction you’re getting into into that home what does that transaction mean what are the risks and what are the benefits to

You as a buyer next 25 points of negotiation and or a review i think that this is huge and i don’t know if there’s a report out there anymore i initially had done a free report for everybody and one of the things i did in there is i want people to understand what they didn’t know about one on financing so i went ahead and i listed the first five things that came

To my head when i thought of what do i get to negotiate in order finance transaction and then i put 20 more blank lines underneath it and i asked people go ahead and fill out what you think all the points of negotiation and a review are going to me when you buy a home using owner financing and of the people that i know that tried it nobody could fill it out even

Other agents and other investors can fill it up of course if i gave you a few days and you could you know research the internet you probably have to spend a whole lot of time researching the internet to get all those things listed out what eventually you could but do you have that time or do you have a full-time job kids family and all this other stuff and that’s

Again why i think it’s so important because a lot of people do think they can go into these transactions on their own but they have no idea what they’re getting into and the possible risk that putting themselves in their family at by doing it by themselves so 25 points of negotiation and review our in owner finance transactions and each one is very important for

Completely different reasons that’s one of the things by the way this video is not meant to push my book at all but one of the things i felt was very important in the book was to have a checklist of those 25 things so even if you didn’t read the book at all the one thing that you could have was this checklist so that when you’ve got in a put a contract in on a house

That you would have this checklist and you can start marking off all the points so that you know that they are dressed you knew exactly what it meant for you and you could just check them off as you go because we all know you know if i’m you’re the home is the american dream we all want on our own home but it’s an emotional decision for the most part and you walk

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Into this situation you love this house you want to hurry up you want to sign it make sure nobody else has a chance to make an offer on it and then all of a sudden then way and you don’t know what to do and okay my option period should i get in a home sec the inspection should i not oh what i and that’s what i see buyers do all the time and everybody thinks they

Can go into it themselves their dreams all the sudden they’re all by themselves and they’re signing a contract without doing all of this and that’s what you know your agent or your i don’t know how much investors really want to be a part of this situation but whoever is on your side to help you through this transaction which i recommend always you know my first

Choice is always at a real estate agent or realtor who has a fiduciary responsibility to protect you and they have to hold themselves to high ethical standards and that’s why i personally you know am a realtor because i believe in that but i’m an investor to sew and i know lots of investors that you know have a lot of education if they’re there helping you you want

To know which questions to ask and make sure you ask the right questions so that you’re educated so again it’s very emotional so you need to have this little checklist so that you are addressing all of these points or have an agent or realtor and it has their own checklist so they are addressing all these points and make sure you ask them 25 points do you have them

All some agents just don’t know how do you want to finance transactions and that’s why i always say find an expert find an expert find an expert every realtor is not an expert at owner financing so make sure that you understand that as well homeowners insurance and in owner finance owner finance transaction homeowners insurance could sometimes make or break you

It can cause a lot of problems if it’s not done correctly from of you the seller and then the lender is going to get involved and that’s never good so next third-party servicing companies i advise all the time to get third-party servicing companies this is somebody who’s going to be your third party if you will if i’m the buyer and you’re the seller then i need

To make payments to the make instead of instead of making payments directly to the bank and having you worried about whether i’m making them or not because you’re the seller i’m going to make him to this third party this 30 party is going to then make all the payments to everybody else so it might be they might be holding an escrow account now hold your taxes and

Insurance they’ll be making the payments to the bank every month maybe two the hoa every month but they’re responsible for all that stuff and their communication with both you the seller both me the wire if that was the situation so that puts the seller it is because the seller knows that the payments already made puts a buyer at ease because i don’t necessarily

Want to give my payments to the seller right which in this case is you because i don’t know if you’re going to pay it and i don’t want to be foreclosed on if i’m actually paying you and you’re not paying the bank so third-party servicing companies are fantastic the other things that they can do is they can report to the credit bureaus on behalf of the buyer so

That’s huge and not all of them can do it it’s a point that you want to ask when you hire after part of servicing company to help you puts everybody at ease gives everybody peace of mind i highly recommend them how to find these homes this is very interesting this so many buyers think that you can find these homes all by yourself let me tell you i do this all the

Time full time i’m an expert at it and i know what i’m doing and i don’t even know all the homes why because there’s different investors that aren’t a part of big organizations and they’re out marketing at home on their own so i’ve got assistance in people that work for me that go out and find all these homes and on our website we create the largest online you know

Inventory motor finance home so we go to the mls inventory which is key you know finding a realtor that has mls inventory / finest homes if you’re working with an investor you don’t have those and there’s a lot so you need to go and find a realtor that has access to that there’s also newly coming up an investor type of mls only certain people have access to that

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Investor mls you need to find somebody who has access to that also then you’ve got those individual investors out there so you need to have somebody who’s active enough to be out in the community and finding those homes so that you can go to one person get the entire gamut and wont to find its homes at your fingertips and then be able to choose and look at them

Whenever you want i think that’s very important because owner financed homes are very scarce and you want to be able to it’s not like the candy store mls right where you’ve got everything to look at it’s a little bit more rare to find a notify night zone so you want to at least be able to have as many options as possible so how to find in someone’s make sure you

Hook up with someone that knows what they’re doing and is doing this all the time has access to the realtor i’m an mls what i’m going to call the investor mls another and then can go out and actually do their diligence on other homes how to protect yourself this really has to do with everything that we’re talking about here so let’s briefly go over some of this

Excuse me and so lending again that goes here if you’re landing through another friend s transaction the sellers act need your bank so you need to know all these 25 points of negotiation and or review or protect yourself home inspection so many people don’t think they need a home inspection but let me tell you how many times i’ve had buyers tell me a story about

Them buying a home they didn’t do a home inspection something happened costume fifteen thousand dollars down the road because they didn’t have any idea because they didn’t get a home inspection anybody can walk through the house and say that looks good looks good looks good but what about the roof how old is it what about the you know air conditioning unit the

Everything that’s inside a house that you can’t see you know are they on the verge of breaking of the ten years old and they only have you know shelf life of twelve years so you’re gonna have to replace them in two years this could help you in negotiations actually finding out all that information and seeing if there’s any way that you can have a cell or work with

You a little bit because you might have a large expense coming up in a very short period of time doing your due diligence is very important on the neighborhood the area in the home this should be done during your option period when you’re doing the home inspection if you have a realtor that you’re working with which i always recommend have them do it for you make

Sure that you know the schools are they rezoning is there any you know widening of roads or is there shopping centers being built pretty student things that might affect your decision as to whether you would want to buy that home or not very important to do so most people don’t do it title insurance and title commitments this is especially important to review in an

Owner finance transaction back in the 80s there used to be this very common con of sellers selling a home to a buyer who needed or financing they would collect the down payment and then the buyer would actually pay the mortgage payment directly to the seller the someone was supposed to be paying the big a couple things happen here number one the seller didn’t even

Own the house they weren’t on the deed the buyer didn’t know that they were on the deed because they didn’t do a title and give title insurance and they didn’t know how to read a title commitment even if they did but somebody else would have caught it had this been run in the first place so the seller had no right to sell the house in the first place and beyond

That because this was a con that seller collected the downpayment collected the mortgage payments and took off and now the buyer has spent all that money they don’t even own the home they have no rights whatsoever also you know what if the seller is on the deed but his ex-wife samedi too and he never told you about it well she hasn’t given her permission to sell

The house so there’s some weird things that can happen here and that you can find out via title commitment now unless you’re doing a kitchen table closing most of this will get caught for you but you know again buyers don’t know what to look out for so that’s just a few a thing of the things sorry tax liens of hoa liens vendors liens there’s other liens gonna be

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On the house that you’re going to essentially soon once you buy the house and if you didn’t know about them and then all of a sudden oh and it whoa there’s a twenty-five-thousand-dollar vendors name for that pool they started in the backyard so make sure you run a time commitment you know how to read a title commitment or you were working with somebody who knows

How to read the title commitment survey this is going to come into property lines easements you want to make sure that you know the fence is on the right property line if it’s not and it’s on the neighbors you want to address it quickly because in most states there’s a certain amount of time where that land automatically becomes a neighbor’s if nobody can test it

Also easements if you’re planning on building something in the backyard or you know expanding your house and building out if there’s easements that you’re not allowed to go across you’re going to want to know because that’s going to inhibit you from actually building hoa you’re going to want to know again the restrictions that are the neighborhood what permission

You need from a choice in order to build things and appraisal of course you want to make sure that the whole appraises now for this you know in a traditional transaction you know the lenders not go in any money if the home doesn’t appraise right in this transaction well you’re dealing with the bank as the seller so the appraisal really doesn’t matter where they

Play that comes into play and then owner finance transaction is a few years down the road when you go to refine it now what happens if the market is kind of stale and it sits like this for the next three to five years well you know it depends on where you bought the house at usually owner financed homes are sold for top dollar which is okay selling something for

Top of the market because they’re giving you something nobody else is giving you so it’s okay to pay full market value formal sometimes there’s a small premium for it because it’s an owner finance transaction well in a couple years when you go to refinance what if the house doesn’t appraise do they get to foreclose on you what did you put in the contract to protect

Yourself so that’s very very important right over here when it comes to one or financing because you can’t protect yourself but you need to know what to do loan and refinance terms that’s exactly what we just talked about in reference that our appraisal and that’s why i wanted to talk about that here and the risk involved the risk you know are all of these these are

All risk if you don’t know what you’re doing you don’t know how to read or you don’t know how to address these things or you forget to address these things so the risks involved where all these also the due on sale clause is going to be something that you want to address with your agent the investor your seller somebody again i always recommend working with the

Realtor because there were small sorry working with a realtor who understands and is an expert and over finance transactions let me just you know verify that not all realtors know what they’re doing so the risk talked about the doom on sale closet might not even apply to you depending again on the type of transaction that you did but if it does apply to you need

To know what it is and what your risks are when it comes to do on south los so that’s it i was trying to make this a short video have probably talked really fast and made it a little bit longer than i should have but anyways just meant to give you an overall review the differences and what you should be looking out for and i hope that you enjoyed it hope it was

Helpful feel free to leave comments i’m here on this i think you’re probably on the youtube channel if you’re watching it now but feel free to watch the other videos and visit me at owner finance home store calm or home options easy i actually think that the websites a little bit different so we’ll have that listed for you somewhere in the description or another

Video okay thanks so much have a great day hi

Transcribed from video
What Are My Risks Buying a Home Traditionally Vs. Using Owner Financing? By danilynnrobison