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How can
you purchase
Real estate without going
to a bank? Generally, this will
involve
seller financing. The homeowner,
him or herself makes available
some type of financing. In the
past the use of "Land Contracts"
was very popular; but owner financing
methods and combinations seem
to be endless in their variation
and can be effectively utilized
to the advantage of both buyers
and sellers.
By
law, because we are not attorneys,
we cannot offer legal advice or
prepare the final documents.
But, as real estate professionals,
the HomeTeam, Jack Pearce and
Al Leonard, we can guide
you through these transactions
together with competent legal
professionals.
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Land contract.
A
contract between the
owner of the
real property (called
the "vendor" or the "seller")
and a person who wants to
buy the property (the "vendee",
"contract purchaser", "purchaser"
or "buyer") for an agreed-upon
purchase price.
Detailed information will
be found here..
-
Purchase-money mortgage.
(Seller
financing or owner financing.)
Any mortgage in which the
seller is the principle lender.
- Owner-carried second
mortgage for the down payment.
In
this case the
seller offers a mortgage
that is secondary to the
principle lender. These would
include so called "Wrap-Around-Loans."
See also:
Your Mortgage - Seller Financing
-
Lease/purchase or lease/option.
An
alternative financing option
that allows home buyers
to lease a home with a formula
to eventually buy it. A lease-to
purchase obligates the tenant
to purchase the home after
a specified time. A lease-option
give the tenant an option
to purchase the home after
a specified time which he
can choose to exercise or
not.
Each month's rent payment
consists of principal, interest,
taxes and insurance (PITI)
payments on the mortgage.
Often there is included an
extra amount that is earmarked
for deposit to a savings
account in which money for
a down payment will accumulate.
See also:
Your Mortgage - Lease Options
- Option to purchase.
A buyer
purchases an option for a
specified amount of time
giving him/her the right
to enter into an purchase
agreement for a specified
property at a specified price.
If the option holder does
not exercise the option by
the specified time, the option
seller keeps the option money
and is again free to market
the property.
- Equity Sharing.
Equity
Sharing (also known as Tenants
In Common) is co-ownership
of real estate. The co-owners
share in the equity as well
as the tax benefits of the
real estate according to
the total amount of their
investments.
There are 3 forms of equity
sharing:
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First is the
Traditional Agreement,
-
the Occupier
lives in the property
and pays all expenses;
-
the Investor
pays most of the
down payment and
does not live in
the property.
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Secondly,
Co-occupiers live
in the property together
and split the expenses.
-
Thirdly, Joint
Venturors rent out
the property together
and split the expenses
as well as the profits.
Read more:
Your Mortgage - Equity
Sharing Agreements
- Assumption of Mortgage
and "Purchase Subject to
Mortgage."
Both
agreements are
assumption loans used
by sellers to help
finance the sale of real
estate particularly when
the seller
(mortgagor)
is
in financial difficulty himself,
and needs to sell the property
to avoid
foreclosure.
-
An
Assumption - is
a transfer of the homeowner’s
(mortgagor's) existing
mortgage to a buyer
in which the homeowner
is released from any
further liability of
debt under the assumption.
The new owner steps
in the shoes of the
seller as far as the
mortgage is concerned.
-
A
Purchase Subject to
Mortgage - is an
Assumption mortgage
in which the lender
(mortgagee)
does not release the
homeowner (mortgagor) from
the note and the homeowner
remains liable for the
debt should the new
buyer default.
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