Florida Owner Finance Suggestions
Also See "Advantages"
- The first suggestion is also Owner Financed Properties (OFP's) disclaimer: Always, Always have an attorney, familiar with real estate laws in Florida, draw up the contracts and perform the closing. OFP is NOT a law firm and is not representing themselves as attorneys. The following suggestions are based on OFP's experiences with Owner Finance.
- SPECIAL NOTICE: Some Sates now require that loan origination documents are prepared by a licensed loan officer. This has been done because the states want the buyer to have the same disclosure notices they would receive when they buy real estate with a traditional mortgage. Many note buyers are already on board this and they are REQUIRING all notes they buy to have a licensed loan officer prepare the loan disclosure notices or they will NOT buy the note.
- FLORIDA SELLERS: before you start advertising your property, no matter the method, owner finance, lease to own, lease purchase, rent to own, or lease option, seek legal counsel from a Florida Real Estate Attorney. Many states now have laws that regulate owner finance and they were not well publicized when they came into being. EACH TERM, listed above, has a legal definition with legal repercussions for the person and or entity that ignors and or violates them. Most of the time NON-professional individuals are excluded from formal laws regarding things like real state sales, car sales or business sales. This is NOT NECESSARILY SO any more. Whether you are a business entity, a real estate professional or just plain joe average individual selling your own property, many states have laws designed to protect the buyer. FOR EXAMPLE: IN SOME STATES Contract for Deeds are illegal. Failure to comply with these laws can be catastrophic for the seller.
- FLORIDA TITLE SEARCH: a title search is done for two reasons a. to see if the buyer has any judgments against him, her or them that will prevent the successful passing of the title to them AND b. to see if the seller has any liens and or judgments against him, her or them that will prevent the successful passing of title to the buyer. Buyers, you don't want to pay a down payment on a property, get many months or years into paying for it, and THEN discover that the seller can't give you a DEED, once you have paid it off, because of a judgment or lien. Sellers, if you know of a lien and or judgment is against you and or your property and you don't disclose it, then you could have legal trouble.
- FLORIDA BUYERS: If you don't have a recorded deed when you buy the property, then YOUR NAME is not recorded as the owner and legally the seller still owns the property. So any liens that are filed against the owner, even after you make a formal purchase via a contract for deed, etc the lien / judgment takes priority over your claim and the Deed still can't change hands until the lien and or judgment is satisfied.
- FLORIDA BUYERS: You should have your own attorney look over any paperwork before you sign it. If it is for a real estate purchase the attorney should practice Florida real estate law.
- FLORIDA SELLERS: Selling major purchases today is all about "Disclosure" - if you have or know anything at all, that could be detrimental to the buyers, if you dislcose it, in writing, to the buyer, then, for the most part, you have complied with the basic of laws. SO AGAIN, seek legal counsel from an experienced Florida real estate attorney. A title company attorney is usally very up to date with all laws.
- FLORIDA BUYERS: It is very important that your offer is in writing. Make sure it is thorough and complete. You shouldn't even try to remember your offer let alone make it so the Seller has to remember it. Let them "see" your offer. It is more clear and easier to make a decision.
- FLORIDA SELLERS: It is very important that your answer to the Buyer's offer is also in writing. This avoids mistakes, misunderstandings and maybe even lawsuits.
- FLORIDA SELLERS & BUYERS: You may want to Hire a Professional Negotiator to negotiate the sale / purchase price and terms. The main reason real estate agents earn their money is the public's inability to successfully negotiate. Too many times the seller or buyer takes things personally or makes them personal. Most negotiators will work for a low flat fee per negotiation or a higher fee for successful negotiation that results in a closing.
- FLORIDA SELLERS: Selling the Note: If you don't want to carry the note the entire term, after it has aged (generally 6 months to a year) you can sell it to a Note Buyer. The note buyer will purchas the note based on how well the buyer is paying you. They may aslo pay you based on the value of the property or the value of the note.
- EXAMPLE 1: The subject property is appraised at $100,000 so the note buyer may pay a maximum of 90% for the note, based on the value, so $90,000. If your note is for less than 90% they will probably pay you the exact amount of the note. If your note is for more than 90%, they will only pay 90%. So you loose some money but you have your cash now.
- EXAMPLE 2: You sell the property for $100,000. The buyer pays 5% down ($5,000). You provide proof of payment history and the note buyer pays you a percentage of the note. Generally this ranges from 80% to as much as 97% of the note. NOTE: Note buyers also use the type of property to determine what they will pay of anything. Raw land is generally a few low percentage 50 to 65% max.
- FLORIDA SELLERS: Simultaneous Closing: Simultaneous closing is a real estate seller financing technique, whereby the private mortgage note created by the seller is simultaneously sold to a note buyer on closing.
Typically, the terms of the note are agreed upon between the seller and the buyer with some suggestions from the note buyer. On closing day, two transactions take place: a real estate transaction and a note purchase transaction, almost simultaneously. Sometimes the note purchase transaction happens a few days or weeks after the real estate transaction. This depends on how early in the process the note buyer gets involved and whether or not there are closing issues with this transaction.
The seller's main motivation for using this technique is to obtain cash on closing or shortly after, instead of receiving the proceeds from the sale over a period of years.
The property buyer's motivation is to obtain more lenient financing from the seller, especially when credit issues are or have been a problem.
The note buyer is looking for the cash flow from the mortgage note. He has to make sure that he doesn't get too involved in this transaction and thereby appear to be acting as a lender, which he usually is not.
The note buyer is generally someone who wants their money to work in real estate but does not want to do it with all of the regulations that hinder a Mortgage lender, Real State broker, developer etc... Typically, states do not have many laws that regulate note buying....