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| Owner Financing offers many advantages to both buyers and sellers in today's difficult real estate market. |
| Choices Real Estate is happy to offer the homes below that are available with owner financing, or to help you find other owner-financed properties that meet your needs! |
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Below are our featured properties offering owner financing |
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Owner financing can offer benefits to both buyer and seller in today's difficult real estate market.
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For buyers
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| The mortgage market has tightened up in recent years. It can now be difficult to qualify for conventional mortgage financing, especially for those who are self-employed, who have had a change of careers, who are retiring, who own investment properties, who are waiting for settlement of an estate or lawsuit, or who have had any credit issues.
Often buyers with adequate income, decent credit, and reasonable down payments still find that they "fall through the cracks" of the new, more restrictive mortgage company regulations. Owner financing, even for just a few years, can offer a great solution. Typically sellers offering to hold financing on a home will offer
a competitive interest rate, and amortize the loan over a 30-year period, but then have a "balloon" payment provision, specifying that the entire balance is due after an agreed period, usually of several years. This allows the buyer to purchase the property right away, and then refinance within the specified period, having had
the opportunity to establish sufficient time in self emplyment, or in a new job, to straighten out problem credit, or obtain the expected fund from an estate or lawsuit. To sum up, you buy immediately, paying mortgage payments to the sellers for a few years, then refinance after having had time to deal with whatever issues were preventing you from qualifying.
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For sellers
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| If you've been trying to sell your house, you're probably aware that the market it pretty poor these days. There are far more properties available than there are qualified buyers wanting to buy them. And often when buyer and seller have agreed on a price and the property is in escrow, the deal falls apart anyway because the appraisal comes in low. New appraisal rules
that have gone into effect in recent years have made it more difficult for appraiser to get a property to appraise for the contract price, especially for rural properties or very unique homes, because there are often not enough similar comparable sales (at least 3) that are recent enough (within the past 3-6 months at most) that are located close enough to the property to meet
the appraisal guidelines. So many sellers are finding themselves facing the choice of selling for a lower price, or not selling at all. If you hold owner financing on the property, there is no requirement for an appraisal, and even if the buyer wants to have an appraisal, for their peace of mind, you at least have the option of mutually agreeing on an appraiser who is competent and experienced in your area, rather than
having to take potluck with whichever appraiser is next up in rotation on some area-wide list. And, of course, there is the big advantage of opening your home up to more potential buyers. Gone are the days when it appeared that the only requirement for obtaining a mortgage was having a pulse! Many individuals with generally good credit, adequate income, and respectable down payments are finding they can not qualify for
a mortgage these days, for a variety of reasons. Jumbo loans have become very difficult to obtain, so if you are trying to sell a high-end property, the pool of buyers who will be able to obtain the necessary financing has shrunk considerably. It has become very difficult for people who are self-employed to get a mortgage, and also for anyone who has recently changed employment. Buyers who want or need to rent out their
existing home rather than selling it (perhaps because they are upside-down on the property, or find they are unable to sell it, or just want to hold on to it as an investment) are finding they cannot qualify under the new rules because the mortgage company will no longer count the rent they are receiving as income to offset the mortgage payments they are making on the property. So their payment out counts against them in their qualifying ratio, but the payment "in" from the tenants
doesn't count as income! If you are in a position to hold financing on your home, even for a very short time, you open up the field to far more potential buyers, and can make sure it is at little risk to you, by pre-qualifying your buyers and by using a New Mexico Real Estate contract (see below for details on the advantages to this kind of "REC.") |
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The New Mexico Real Estate Contract (REC)
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The New Mexico Real Estate Contract is a unique financing instrument in New Mexico. When a buyer and seller elect to use this instrument for owner financing, rather than a mortgage or deed of trust, it is set up as follows:
- At closing, the buyers make the agreed down payment, and both parties sign the Real Estate Contract, specifying the terms of the financing, such as interest rate, payment about, balloon payment provision, etc.
- The seller signs a general warranty deed over to the buyer
- The buyer signs a special warranty deed over the the seller
- Neither deed is recorded with the county; instead, a memorandum of real estate contract is recorded
- Both deeds are held in escrow by an escrow company
- Buyer makes payments to the escrow company, as provided by the REC
- The escrow company then disburses the sellers funds to the seller, and any other agreed-upon payments (such as underlying mortgages, tax payments, insurance payments, etc.) as provided for by the terms of the REC
- If and when the payments have all been made according to the terms of the contract, the escrow company release the general warranty deed to the buyers to be recorded
- If any payments are NOT made as required, the escrow company send the buyer a demand letter, as specified by the terms of the REC. If payment is still not made after demand procedures have been followed, the escrow company releases the special warranty deed back to the seller for the seller to record. The seller then has the property back, without having to go through the judicial foreclosure process.
For more details on the New Mexico Real Estate Contract, see
Real Estate Contracts in New Mexico by Larry Buchmiller.
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