Are you considering buying a home by financing it through the owner? This could be the only option for many people, and in many cases, it works out just fine.
But, If you do not have a lawyer working with you as you sign the papers and agree to the conditions set by the owner, you could find yourself in a world of trouble. Here, you will learn a little about what can go wrong if you buy a home using owner financing and don't have a real estate lawyer working with you.
If the owner of the home does not hold the title free and clear, you could run into problems down the road. If you are paying the owner each month and the owner fails to pay the mortgage on the house, you could end up losing your home to the bank. Since the title is not in your name, there will be very little you can do.
Having a lawyer working with you will help to ensure you do not get involved with an owner financing agreement that will lead to troubles down the road. The lawyer will check the owner's credit history, the current standing on the existing mortgage and help you decide if buying the home from this person is a wise decision.
When you do pay off the balance of the home, you could be responsible for the entire balance of the sales tax on the property when the title is transferred into your name. You could be forced to take out a new loan to cover the cost of the taxes that are due.
Your lawyer will be able to look into the legal terminology contained in the existing mortgage agreement that the owner holds. If the loan is not assumable, you should expect to pay the entire amount of sales tax at the time of title transfer.
Chances are, the seller is not offering financing out of the goodness of his or her heart. Of course the seller is only offering this option to benefit from it. Because of this, many owner financing agreements come with very high interest rates. These rates can be negotiated if you are aware that they exist.
Your lawyer can work with the owner to try to negotiate a more reasonable interest rate. If the owner is so desperate to make money off of you by collecting extreme rates of interest on the loan, you may be wise to walk away and search out another housing alternative.
Your best option is to talk with a real estate lawyer like Iannello Anderson prior to signing any seller financing agreement. This is a big investment that could cost you a lot over the next thirty years if you do not take the necessary precautions up front.