Owner Financed Mortgage question

[AbbeyA]

We are 2 years post bk discharge and 1 year and 5 months post foreclosure completion. We have been renting the home we are in and would like to have a serious discussion with the owners about an owner financed mortgage. What interest rate would you consider to be a fair amount for us to propose to them?

They are aware that we want to discuss it with them -- we're only at the VERY beginning stages of this, so we don't even know about how long we would want the term to be (or how long they would want it to be, if they want to consider this). The owner will be in town sometime in July and that is when we will sit down with them to talk things out.

We were thinking of somewhere around 6-7% interest - what would you think would be a fair amount to offer them?

[HHM]

First, look at what market rates are in your area...a fair rate given your credit would probably be 2-3% over the current market rate as a risk premium. So, if market rates are 3.75%, then offer 5.75%, I probably would not go any higher than 7%. Also, you should take into consideration any spread. Does the owner have a mortgage, if yes, what is the balance owed, the payment, and interest rate? If so, you "might" need to offer more.

However, from a pure negotiation tactic, you should have them come to you with a number FIRST.

[AbbeyA]

There is no mortgage on the house. The woman who lived here passed away and her sons are now the owners of the home after her will was executed. The sons both live out of state, they wanted to sell the home a few years back and then the market tanked ....

I have wondered if there are any significant tax implications for them if this situation worked out, which might deter them from moving forward on it.

Thanks for your response HHM, I'll keep everyone posted on how the discussions go later this summer.

[AbbeyA]

So the owners of the house are not interested in selling the house at this time : ( We offered them 15k above what another house in our neighborhood sold for, the other house was much nicer than ours. We will be able to continue renting here for another two years, which we will need. I am very grateful that we don't need to move again since we can continue the lease, but I have to admit I am a little bummed that they don't want to consider it at this time.

[Carter]

AbbeyA, I'm kinda glad for you that this didn't work out. I am in a contract for deed/seller financing house right now. I signed and moved in 4 yrs ago and now I am ready to get my financing to pay off the seller. I had it appraised and it's upside down. The seller is not willing to lower the price to the appraisal (it's $100,000 upside down). Now we are having to walk away from the house because it did not appraise. As a result it converts to rental payments ($70,000 payments total loss to me plus repairs I made over the the last 4 yrs.). My opinion, keep renting until you are ready to buy it the traditional way. Good Luck to you!

[AbbeyA]

AbbeyA, I'm kinda glad for you that this didn't work out. I am in a contract for deed/seller financing house right now. I signed and moved in 4 yrs ago and now I am ready to get my financing to pay off the seller. I had it appraised and it's upside down. The seller is not willing to lower the price to the appraisal (it's $100,000 upside down). Now we are having to walk away from the house because it did not appraise. As a result it converts to rental payments ($70,000 payments total loss to me plus repairs I made over the the last 4 yrs.). My opinion, keep renting until you are ready to buy it the traditional way. Good Luck to you!

I'm sorry it didn't work out for you, that has to be extremely disappointing. Good luck to you too, it looks like you are almost done with your 13! That has to be a fantastic feeling!!!