Seller or Owner financing, and the term "taking back paper" - Do's and Don'ts

Seller financing is defined as a  loan provided by the seller of a home to the purchaser. It could be for a portion of the sale amount, or for the entire purchase less a downpayment. The buyer would then make monthly installment payments over a specified time until the loan is fully repaid at an agreed-upon interest rate.

A seller take-back is just like a loan from any lender. It must be repaid according to the terms and conditions outlined in the note. If not repaid, the property can be foreclosed upon, just like with a bank.

Have an attorney prepare and review the take-back/seller financing  loan papers before signing anything. If you are a seller, insist on seeing a buyer’s credit report and past tax information — just like any lender. And be sure that any loan arrangement is written according to terms which are satisfactory to your attorney.

There are benefits and drawbacks to both parties.

BUYER BENEFITS:
It may be the only way that you can purchase a home at this time.
Both the buyer and the seller can quite possibly save a lot of money in closing costs. The seller conveyance tax on property is going up as of July 1, 2011. It might help your case!
You  can negotiate an interest rate, repayment schedule, and other conditions of the loan, not like with a bank
 You , as the borrower would not have to pay PMI insurance unless required by the seller, and as a bonus, you do not have to go through a bank's loan underwriting department, who usually places conditions of the loan with your approval, if you can get one. .
 
BUYER DRAWBACKS:
You could pay the loan  back in full but still not receive clear title due  to encumbrances, items not divulged by or unknown to the seller, or the seller disappears. He would have to file a release of lien for you to be able to sell the home when you want to.
You may not have had the privilege or right to obtain the protection of a home inspection, mortgage insurance, or an bank appraisal to ensure that you are  not paying too much for the property. Make sure this is part of your agreement.
Make sure that you hold title to the property with a seller note. If you don't and he defaults on his current loan, or has encumbrances on the property that you are not aware of, YOU will be kicked out, and your money lost  if he goes into foreclosure.

SELLER BENEFITS:
The seller can receive a higher yield on his/her investment by receiving equity with interest, if negotiated that way.
The seller could negotiate a higher selling price  as well as higher interest rate.
The property could be sold "as is" so there will be no need for repairs.
The seller could choose which security documents (mortgage, deed of trust, land sales document, etc.) to best secure his/her interest until the loan is paid.

SELLER DRAWBACKS:
The seller might not get the buyer’s full credit or employment picture, which could make foreclosure more likely.
Depending upon whatever security instrument that was used, foreclosure could take up to a year or longer, if unfortunately needed.
The seller could agree to a small down payment from the buyer to try and help out the buyer and to make the sale, only to have the buyer abandon the property because of the small investment that was at stake.

Seller-financed sales can be good, as long as it is a win-win situation for all parties- good for both seller and buyer.  NEVER attempt to enter into a transaction like this without the assistance and guidance of your attorney.

GREAT COMMENT BELOW BY JENNIFER BUCHANAN- PLEASE READ

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What you should know before choosing a neighborhood to live in

Buying a home is a big investment of time, money and emotions. It can  be a dauntless task without the best guidance possible and assistance available to you. So go ahead, and ask questions of your agent if something is of concern to you. Maybe your question or concern is not  something that most other people would ask. I say ask anyway- you are spending thousands of dollars and you have every right.  A few things to consider are:

Resale statistics- What are the resale statistics for the last 10 years for the house, (if it has been sold receently), the street, the neighborhood, and the town? Compare them and see how that home stacks up.

How recession proof is the neighborhood?Is the neighborhood transient? More sales activity on any given street, and homeowners moving in and moving out in a few years rather than the national average of seven years could be a positive thing, or a negative one. If the homeowners all tend to work at one company, and that company isn't doing well for example, then there may be a lot of layoffs, and home sales at distressed values. That could hurt your resale for years. If the neighborhod is considered transient, it could be  1) that it is a starter neighborhood (no issues) or, 2) It could be a lot of executives choose the location for its proximity to transportation and they get transferred (no issues), but that doesn;t always mean that a transient neighborhood is a safe investment.  Just ask your agent to give you statistics, and be prepared to stay there emotionally and monetarily  if a recession hits.

Public School rankings- Very important even if you don't have any children, or any children in school.   When you decide to sell the home, buyers always ask for the best school districts. If at all possible, look for a house in that district. It may not make a difference to you now, but when you sell, you will get more of a premium for your home because of it.

Where are the sought after streets, and why? Every town or city has those few streets that have that "je ne se quios". Find out which streets they are- and why, if you can. I can think of a few streets in every town that just say "YOU MADE IT", and others are well known for neighborhood activities.  The homes on those streets tend to sell quicker and for more money, so be on alert.

What streets have traditionally had less than average  re-sale value? You know they exist- think about a street right now in the town where you live, and  people grimace when the name of that street comes up. That very good deal on that house in the town that you want to live in could be a very good deal because of that!  Also take note, that some neighborhoods have natural boundary lines, and if you want to live within that neighborhood, that across the street from that boundary line is not considered in that neighborhood. I can think of areas in cities where one side of the street is considered okay, and the other side IS NOT. Check into it!

Neighborhood ambience.  Does the neighborhood have the same feel throughout, or does it change down the street. If so, why? Do certain homes stick out as being absolutely perfect, while others look like they are unkempt? Pay attention to the neighborhood, and that brings me to my next point.

Does the neighborhood have a different feel from day to night, or weekday to weekend? There are neighborhoods that I, personally, wouldn't venture into after 8PM at night. If that's the case, I won't take you there in the day to look at a home. Some neighborhoods change at night, and that change may not be to your standards, so it is important to see for yourself.

Where are the parks, shopping, restaurants, health and town facilities. Well maybe you don't care too much about the parks for yourself, but it only helps resale value if you are close- just not too close. You might wnat to know if the nearest grocer closes at six PM, and doesn't have as much stock as you would like. Walk in clinics, hospitals, and pharmacies are important too. Nowadays, there are usually walk in clinics in most towns that we all hope that you don't need, but you have to think about that. You should also be able to find 24 hour pharmacies in somewhat close proximity. And where are the fire hydrants on your street, how close are they to your home, where is the nearest fire department, what's their response time, and where is the Police department. Lots of research, I know. Better done sooner than later when it's too late.

Crime rate for the neighborhood, as well as for the house itself. Check into the crime rate for the neighborhood. As an agent, I am unable to tell you this, however I can reer you to the Police Department and you can ask yourself. You may want to ask for the history of any crimes reported at the house, as well. If a violent offender lived at the house previously, someone exacting revenge on that person may not know they no longer live there. Might it be a good idea for you to check that out? I think so. You may also want to check the sex offender registry to see if anyone on that list lives on your street or nearby. If you have a question about poltergeists, or psychological impacts on the home, see my previous post on that here.

I am happy to help you  through your buying process, and make it as easy as possible. Just look at some  testimonials from past clients. They say it better than I ever could.

... and when you are ready to buy a home, please contact me :)

Why doesn't the listing agent show your home more often?

If your listing agent is not showing your home as often as you would like, it does not mean that your agent is not working hard for you. A lot of homeowners think it's only natural that their listing agent should be showing their home. And it is, to an extent- but it doesn't always happen, and try not to get too upset about it.

When you hire your agent, you expect your agent to market your home to the best of their ability, and to get as many buyers through the door as possible, so that one of those buyers ends up purchasing your home.

If we look at things realistically and statistically, most agents have a group of buyers that they are working with at the present time. Let's say, on average, that number is 25. Out of those 25 potentials, how many would be in the market for your home? Most agents work in a variety of price ranges, and towns, so the possibility of an existing buyer being interested in your home is somewhat slim.

Which brings me to the next point- If the agent is marketing your home, and marketing it well, wouldn't they get new buyers just from your listing, that would already have some interest? The answer to that is yes, but the amount all depends on how marketable your home is as well as the agent's marketing efforts. For example, if your agent made sure that your home had all the exposure it could possibly have, your home may not be as marketable  as you think it would be. The other point to make here, is that you must make sure that your agent presents your home in the best possible light to buyers. Even when all the conditions on marketability and presentation are met, the market may be very slow. It does not mean that your agent is not doing their job.

The last piece of the puzzle, and the most important one, is that your agent also markets your property to other Realtors. It is a well known statistic that the vast majority of agents RARELY sell their own listings. In addition, historically, less than 3% of all homes sell at public open houses.  

In our area of Fairfield County Connecticut, there are over 7,000 agents who are members of the Multiple Listing Service. If they all had 25 prospective buyers, wouldn't THAT be a great place for your agent to concentrate some of their efforts to secure a sale for you? What do you think the possibility is that just one of those 7,000 members has a buyer for your property. That would be,..... well 7,000 times greater than just your agent having a buyer, wouldn't it?

So try not to get too upset if your agent doesn't show your home as often as you would like. Some agents, myself included, show their own listings more frequently- and secure sales on their own listings, but that also is rare, and even for those of us who do manage to  find our own buyers for our listings, it's the exception, rather than the rule. Just remember, that your agent is  working on selling your property nonetheless.

All about the town of Fairfield Connecticut

The town of Fairfield Connecticut is located along the coast of Long Island Sound in the mid-eastern section of Fairfield County. It's proximity and accessibility to New York City along with its five sandy beaches and 6 mile coastline make this community an excellent choice for anyone desiring the amenities of a nearby metropolis along with the comforts and traditions of a New England community. The Town of Fairfield  was incorporated in  1639 and encompasses approximately 30 square miles. Some quick additional demographic data:

Elevation 15 ft.                                                             
58,000 Residents
20,600 Households
81% owner occupied
37% of homes built prior to 1950

See Fairfield CT Listings, now

Fairfield, as a community, holds deep in its heart the rich tradition of its history and there are numerous nationally registered historical landmarks scattered about in town. The cultural diversity and arts community are both impressive and expressive, and annual local fairs, festivals and fundraisers are of the norm.

There are five golf courses in town, public beaches, lakes, tennis courts, numerous parks, playgrounds and outdoor activities for everyone. Another fine feature of this town is its ease of transportation. There are currently two train stations, and a third on the way that are serviced by the Mtero North Railroad. Major transportation arteries, such as Interstate 95 and one of Connecticut's scenic roads, Merritt Parkway (Route 15), offer convenience to all commuters.
The public school system is one that is well noted for its excellence. Fairfield also hosts two higher education learning institutions, Fairfield University and Sacred Heart University.

Different enclaves in town make for a scenic ride anywhere within the Fairfield's boundaries. There's the older Stratfield section, historic Southport on the water, which certainly has the feel of a quaint New England town such as Nantucket, and the beautiful landscape of Greenfield Hill, among others. Each year, thousands of visitors visit Greenfield Hill's much celebrated 10,000 tree Dogwood Festival, which is held each spring. Fairfield is a town where there really is a place for everyone. Where else can you purchase a home for $250,000 all the way up to 25 million?

Some additional information and our favorite links

Is there such a thing as proper etiquette when buying a home?

If you are in the market to purchase a home, there is some standard of behavior towards homesellers, other homebuyers, and Realtors that is just common sense, as in the "Do unto others, as you would have them do unto you" general rule. Sometimes, a homebuyer is unaware that a gesture, comment or action could be considered inappropriate, and may impact their purchase in a negative way.  I am not singling anyone out, and absolutely mean no harm  to anyone by suggesting that buyers do any of these things on purpose, or with malicious intent.

1. Sellers and/or agents cannot always accommodate an immediate appointment. In many instances, at least three phone calls, and three conversations must take place before an appointment is confirmed. If just one person is unavailable, it will delay a prompt appointment. Al of that is assuming the agent can go on a moment's notice- which is not always the case.

2.If you are working with an agent who is on vacation, or away for the weekend, do not call the listing agent to show you their listing. For that matter, do not call any other agent other than the one that is covering for your agent while they are away for any reason. It's disrespectful to your agent, and the other agent involved. Ask your Realtor who to call in he/she will be away for any amount of time.

3. If your friend is  Realtor, and they are "helping you out", do not call another agent because you don't want to bother your friend. Again- disrespectful to your friend as well as the other agent.

4.Do not ever go to a listed home unescorted by your agent, or walk someone's property without express permission to do so.

5. If you have signed a contract for an agent to represent you in your purchase, do not mislead another agent by telling them you haven't. This one could actually cost you money, so it's very important.

6. Wipe your feet before you walk into a home, remove your shoes if the seller has requested it, and ask if you can use the bathroom in the home if you need to.

7. Do not take photos of the interior of the home unless you get permission to do so first.

8. If you are previewing homes for an intended purchase next year, let your agent know. They may not show you as many properties, but they may have clients that need to purchase right away, and they will take precedent over you. It's only fair- if you were in  a rush, you would expect to take precedent over someone who was not, and you would be well within your rights to feel that way.

9. If you are a licensed agent yourself, and do not have access to the MLS, tell the agent.(and you should know better than to withhold that)

10. If your agent asks you for financial information, such as a prequalification letter, a pre-approval letter, or proof of funds (for cash buyers), please don't be offended. It's standard practice-the seller will need that information even if you offer 10% ABOVE asking price.

11. Don't stalk the house, for heaven's sake

12. It is against the law for agents to show you houses without  represention, or an acknowledgement from you that you don't want it. At the very minimum, an agreement for the particular property for a short time frame should not be too cumbersome. You do want to make sure that you and your agent will get along, and guess what? The agent is interviewing you as a potential client just as much as you are interviewing that agent as a potential representative.

13. There is no need to bad-mouth a house in front of the seller.

14.If another buyer is viewing the home when you arrive on time  for your scheduled appointment, it is proper to wait outside and give that buyer their space while they are previewing the home.

15. If you are going to be late for a scheduled appointment, whether it's meeting your agent at their office, or meeting your agent at the property, call or text your Realtor. Your agent may have a number of appointments scheduled that are on a time crunch. Some sellers have very specific times that buyers can see their home, and cannot accommodate an appointment if the buyer is even ten minutes late. Give your agent the opportunity to call those sellers and let them know. One of those houses could be the one that you want to buy, and you've gotten the seller mad at you because you came late. All of this is not to mention that it is rude to your agent to be late without a call telling them so.

16. There are generally accepted viewing times. Eight AM on a Sunday morning is not one of them- neither is 9 PM on any evening. Use discretion- we understand that your schedule may be tight, and agents and sellers alike will most always do everything to accommodate you, just be reasonable.

17. Do not call the homeowner directly to discuss anything, period.

18. If you drive up to a house, and absolutely hate the neighborhood, the street or the house itself, don't refuse to go in. Just make an effort to go through the house very quickly and leave. That seller has anticipated the appointment and would be very hurt if you couldn't even walk in the door.  Who knows, you may be surprised. NOTE: If the seller is not home, and you don't want to go in for whatever reason, your agent can handle that, and no need to go in to a house that you know you don't want if no one knows. (Expect your agent to make a call to the Listing agent telling them just that.)

19. Don't overstay your welcome at the house, or on the property. There is a reasonable amount of time to look at a home, and for some people it's only five minutes, for most- it's about twenty minutes, and for a few more, it's upwards of 45 minutes. All are okay- you should go at our own pace- nothing wrong with that. Just stay focused on the house that you are seeing, and don't talk about the other homes on your agenda, or Johnny's baseball game, or dinner tomorrow night at your favorite restaurant  while you are there.

20. Keep any positive or negative comments to yourself until you are in the car and out of earshot to the homeowner.