Owner finance homes in Houston are properties where the Seller creates a loan with the purchaser. This just means the Owner provides financing directly as opposed to the Buyer getting a third party loan. The Buyer will consent to make monthly installment payments over a predetermined time, at an agreed interest rate, until the loan is completely reimbursed to the Seller. Generally the Buyer will sign a Note and Deed of Trust (Security Agreement) to ensure payment to the Seller just like a financial institution would do. Housing can be obtained with owner financing the same way as a financial institution as long as the seller is willing to finance the Buyer for the terms that are agreed upon. How can a Real Estate Attorney in Houston help you structure your owner finance transaction?
If you have a discrepancy with another property owner, you should address it promptly. Delaying a resolution could cause you further damage. The first step to take is gathering all your documentation. Most documents you need will be recovered from your closing package, a survey and documents from the city such as plat maps and deeds.
Once you have all your documentation it is important to get with one of our Houston property dispute lawyers to conduct a property audit. A property audit is a complete review of all the documentation pertaining to the dispute. The lawyers will interpret all the documents and establish what rights you have what can be done to remedy the dispute.
It is not unheard of for a seller who offers owner financed homes to sell in less time than a traditional sale regardless of the market landscape. With minimal options, homes offering owner finance don’t stay on the market long. Multiple parties being interested in a property increases the sales price and sells the property in a quick manner.
With limited properties offering owner financing, Owner Financed homes attract quite a bit of attention. In many cases there may be multiple parties interested in the property regardless of the market conditions. This can cause an “auction effect” and drive the price of the property up. This “auction effect” can drive the price of the home up by $5k-$15k. Buyers are willing to pay a premium for this type of financing, particularly if they can’t get traditional financing.
Eliminating Taxes, Insurance, and Repairs- Even though Sellers may not get the full proceeds of the sale up front on Owner Financed homes, it still is a complete conveyance of property. The Seller can still generate monthly cash flow like a rental property, but the Seller is no longer responsible for many of the responsibilities of homeownership. Owner Financed homes eliminates taxes, insurance, repairs, and maintenance a rental requires.
Just like a bank, acting as the lender gives you the best benefit of all. Yes that’s right, earning interest! In addition to having your equity paid in monthly installments, part of that payment is interest. On a $100,000.00 fixed rate 9.9% 30 year loan, you could earn roughly $213,000.00 in interest? Keep in mind the contract has to be written correctly and this would be the reason to have one of real estate attorney in Houston in your corner. Don’t you want to protect your investment?
Another great benefit of going with owner financed homes is tax deferment. Tax deferment doesn’t mean you don’t pay taxes, it just means you don’t pay taxes on the capital gains all at once. Since the Seller doesn’t realize all the capital gains of the transaction in the same year, that will reduce your tax obligation for the life of the loan.
In order to calculate your capital gains per year of the loan, you must know your cost basis of the property being sold. The cost basis of the property is essentially what you have in the property. It is what you paid for the property plus all allowable costs approved by IRS which usually includes improvements, settlement costs, utilities, taxes and other costs. To ensure peace of mind that you are structuring your taxes correctly with your owner financed homes, let our real estate attorney help you. Let us contact you and explain.
For example, if you sold a house for $100,000 and you had a cost basis of $40,000, this gives you a gain of $60,000. If you spread the sale out over 30 years, this results in a $2,000 gain per year. If you want to know more about how to reduce owner financing risks go to Reduce Risk Factors.
Owner financed homes in Houston and San Antonio or anywhere in Texas for this matter can be a great tool if properly utilized. Keep in mind owner financed transactions are highly regulated and there have been some recent laws that require more compliance than in the past. Before conducting an owner finance transaction for owner financed homes consult one of our competent real estate attorney in Houston, San Antonio or Edinburg offices and qualified tax consultant. Is a Real Estate Attorney Important? Everyone’s situation is different, so contact us and we will let you know if your situation requires or needs a real estate attorney. Don’t wait until it’s too late! We can make sure you are represented correctly from day one.
(Written by Steven Almaraz – Firm Manager)