Video Summary

Hi.  I’m Chip Waller.  I’m often asked about what is owner financing.  Owner financing is whenever someone wishes to sell their real estate, and they’re going to act as the bank and hold the mortgage or note and provide financing for the purchaser so the purchaser does not have to go to a lending institution to borrow the money.

This is advantageous to the purchaser because they don’t have to have the closing costs that banks charge or go through the underwriting requirements.  As far as the seller is concerned, they get a higher rate of interest than what they would on their investments.  The difference as far as getting cash, of course, is that it’s not liquid and that is a downside to owner financing for the seller.

What goes into the owner financing is is how much of a down payment will you receive before you agree to hold the note in mortgage.  This is usually a percentage.  A rule of thumb is to ask at least 20 percent down as a down payment in cash, and then agree to possibly hold the other 80 percent.  The more down payment you receive, the more secure you are.

In dealing with owner financing you want to really be satisfied that if you take back the real estate that you’re financing, it will to be worth what is owed to you.  With this recent economic crash, as far as the real-estate market is concerned, no one could anticipate that the value of property would go down by as much as 50 or 60 percent.  So the rule of thumb of 20 or 30 percent was not a very good rule if you financed property back in 2005 and 2006.

Another thing that you look at in owner financing is the interest rate.  Usually at this time you’re looking anywhere around six, seven, eight percent. Even though borrowers say, “Well, I can go to the bank and get it for four or five,” if you go to the bank and get it for four or five you’ll have a lot more closing costs and a lot bigger hassle.

Then you also need to address how long you’re going to hold the note and mortgage, and that you can keep the payments small, Let’s say you agree to finance it for three years, then you can spread the payments out as if they were going to pay for 30 years, and at the end of three years they have what they call a balloon payment, and they must come up with all of the money, or if you agree to finance it, say, for 15 years, 10 years or 20 years, you can have a level payment called an amortized payment or amortization, and then you get an amortization schedule that goes along with your financing.

The other thing before agreeing to owner financing is that you need to understand what it’s going to take if the buyer fails to make the payments.  You have to go through the mortgage foreclosure process, which takes time, which is probably six to nine months at a minimum.  The cost is anywhere from $2,500.00 to $5,000.00 and up, depending on whether or not it is commercial property and if it’s contested.

So if you have any questions about owner financing, give me a call at 847-2288 and I’ll be glad to talk to you.  Thank you.

Video Summary

I’m often asked to prepare contracts that say a property is in “as-is” condition. The seller wants to be sure that the buyer cannot come back later and say that there is a problem with the property and sue them for any deficiencies in the property so they want to make it “as-is” so that whatever the buyer sees when he purchases the property is what he gets and the buyer does not have recourse to sue the seller later on if there are any problems with the property. A contract will provide for an inspection period to give the buyer a time period in which to inspect the property, after which time they either accept the property or withdraw from the contract. However, a seller does have the obligation under Florida law to disclose to a buyer any matters that may materially affect the value of the property and are not readily observable. This would include anything you wouldn’t normally see just by walking through the property, such as roof repairs, previous fire or sinkhole damage, etc. With an as-is contract, the seller still has an obligation to disclose to the buyer any matters that may materially affect the property and is not insulated from liability if they fail to do so.

If you have a question about a contract or would like me to represent you, please call us at (727) 847-2288. Thank you.

Video Summary

Buyers and sellers wonder about the phrase, “Buyers Beware!” About 20 years ago, the Florida Supreme Court handed down a ruling regarding the sale of residential real estate that changed that rule of thumb. In the case of Johnson v. Davis, the Supreme Court ruled that a seller is obligated to disclose to the seller any problems with the real estate that may affect the material value of the property. These flaws which are not readily observable are referred to as latent defects. Realtors generally ask the seller to complete a disclosure sheet to provide such information about a house. Standard language in a real estate contract includes a guarantee that the seller has disclosed any latent defects. As a result, the buyer has recourse in the case of undisclosed defects and can choose to invalidate the contract or to sue the seller for fraud. However, a buyer’s best protection against latent defects in a property is still to have his own inspections and make as thorough an examination of the property as possible before making a purchase.

Video Summary

The responsibility of who pays which closing costs in a real estate transaction is controlled by the provisions in the real estate contract.

Closing costs include documentary stamps ($7/$1,000) and title insurance (roughly $6/$1,000). In the Tampa Bay are, it is customary for the contract to stipulate that the seller pays these costs. In addition, recording costs of $10.50 for the first page and $8.00 per additional page are generally paid by the buyer. Any attorney’s fees will be paid by whichever party hires an attorney. In some transactions, the buyer and seller agree to split the attorney fees.

A contract can be written to stipulate that either party is responsible for all or part of any closing costs involved in the transaction, but the above guidelines provide a general overview of the standard way costs are handled in our area.

If you would like to have a real estate contract prepared, either as a buyer or a seller, call us at (727) 847-2288.

Video Summary

It is probably a good idea to obtain title insurance. Title insurance protects the purchaser of a property to ensure that he or she receives marketable title. It also assures that there will be legal egress to a property so the purchaser will have access to the property. Title insurance provides you recourse in the case of an error in the title search. It does not provide any protection to the seller of the property.

If you purchase a home through a mortgage instutition, such as a bank, the lender will require title insurance be held on the property.

On your insurance policy, an examination of Schedule B-2 on the policy will reveal any exceptions under which the property title is not insured. If the city or county has a lein against the property, that should be revealed in Schedule B-2.

For representation when purchasing or selling a property, please give us a call at (727) 847-2288.