Tips for Owner Financing Your House In Lancaster PA

Keys to House Lancaster, PA

If you own a house free and clear of a mortgage, owner financing can sometimes be a great strategy for both the buyer and seller depending on the situation. Basically, owner financing is when the seller becomes the bank and carries the loan for the buyer for a certain period of time.  When you owner finance a house in Central PA, you and the buyer create the terms and they can get as creative as you want as long as the transaction remains legal.  Below we outline some tips for selling your house with owner financing in Lancaster PA.

1) Understand the Buyer

While there are a lot of reasons to use owner financing when you sell your home, because you’re the lender in the case you will want to have an intimate understanding of your buyer.  You will need to do you own due diligence on who the buyer is and what their qualifications are to make the purchase.  You should have the buyer provide you all the information you need such as references, work contacts and history, permission from the buyer to run a credit check and background check, and anything else you might want to investigate. It’s important to understand if the buyer CAN’T get a traditional bank to finance them, or if they’d just rather not.

2) Seek Legal Council

Seeking legal council as your putting the transaction together can’t be stressed enough! You and the buyer should agree to all of the terms in writing such as the down payment, how long the loan is for, if there’s a balloon payment, what the interest rate is, and remedies in the case of a default. You will need both a mortgage and a note, but again, an attorney can help you draft the final version of these once you have agreement on the general terms. You will also need a promissory note to be recorded in the county records of the property.  Remember that even though we want everything to go just the way we planned it out, sometimes it doesn’t. Your attention to detail, and making sure your agreements are reviewed to make sure nothing is missed or illegal is CRUCIAL!

3) Be the Banker

Again, because you’re playing the bank, you need to act like the bank in certain ways. This includes tracking all payments and making sure that they’re paid on time.  Also, you will need to make sure that homeowners insurance is kept in place at all times and that you’re listed as mutually insured on their policies. If anything where to happen to them or the property, you want to make sure that you’re covered through their insurance. You also need to make sure that any other payments are being made by the buyer such as real estate taxes, HOA fees and anything else that you had been responsible for in the past. Make sure that you have a system in place from day one to make the process go as smoothly as possible.  If you think it’s something that you’re going to struggle with, one option is to hire a firm to service the loan for you. This can save you a lot of time and headaches when owner financing your Lancaster home!

4) Take Advantage of the Upsides

While this arrangement of owner financing your home can seem like it serves the buyer more, there are a number of great benefits for the seller! First, if you owner finance the house you may very well not have to put it on the market in order to find a buyer. If that’s the case, you can save a ton in realtor fees which in Central PA is typically 6% of the sale price.

You also will be able to collect interest on the amount that’s being financed. With traditional bank interest rates being so low, this can be a great option to keep you money secured and working without needing to find ways to reinvest. Finally, there can be great tax benefits to selling your home this way.  If it’s not a house you’ve lived in, or if you haven’t lived there in a number of years, you’re typically required to pay capital gains on the proceeds of the sale.  However, when owner financing a house you can do what they call an “installment sale.” This means that the IRS will not make you pay taxes on the gains all at once, but rather spread them out in relation to the amount of money you’ve collected.  This can be huge as far as keeping more money in your pocket over the long run.

We Buy Lancaster Houses often works with property owners who are interested in owner financing their homes or rental properties to reliable, experienced, and proven buyers. If you would like to discuss selling your property with owner financing to We Buy Lancaster houses, give us a call or contact us here!

Call We Buy Lancaster Houses at (717) 715-0010 or send us a message to talk about owner financing your Lancaster house TODAY!

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