Dangers Of Owner Financing Your Home

One way people often purchase property or a home is through owner financing. This can be very appealing for a variety of reasons, for both the seller and the buyer. This is especially true right not as banks are not approving people for mortgages even when they have good credit and a have a well paying job. But buying property through owner financing must be done carefully. First, if a realtor is not involved it is a good idea to get an attorney to make sure all the legal documents are in order. A few years ago I heard about someone who paid monthly payments for their new home for a year only to be evicted and lose everything because of some little loophole the owner had included in one of the documents. An attorney would have caught it but the buyer never got legal council before signing all the papers. Then he was late on one payment and according to the contract everyone had signed, the seller was able to evict the buyer and keep all the payments that had been made. The buyer lost everything.

Last night on the news I heard about another issue that a person needs to watch out for when buying straight from the owner. A couple bought a mobile home knowing there were back taxes on the home that needed to be paid off. This time an attorney was involved and he promised and later claimed he did pay off all the taxes. So the couple was in shock when they got a letter saying the home was being foreclosed due to back taxes. In this case the couple contacted a local TV station who was able to get the situation resolved. Before buying property with back taxes on it, get proof all those taxes have been paid off. Or at least insist in writing that the back taxes be paid off by a specific date and insist on receiving a copy of the receipt proving it was paid off. Verbal assurance is not enough.

The last warning I want to share is what apparently happened to the widow who is selling the property I am trying to buy. My realtor shared with me that the couple bought the land directly from the previous owner and paid for it by owner financing. They never got a mortgage from a bank and apparently never hired an attorney. Once the couple paid off the property, the previous owner filed the proper papers to change title of the property. Apparently though he only put the title in the husband’s name, not in both the couple’s name. The wife assumed her name was on the title, which it should have been. If her name had been included on the title, she would have owned the property outright upon her husband’s death. Since her name was not on the title, not only did she not own the land, but his children from another marriage actually have legal rights to the land. This one little issue has created a huge mess. Fortunately for me, the children have signed papers relinquishing any claim to the property. Now I am just waiting on the Title Company to finish the Title search and approve the sale of the property.