Owner Financing Albuquerque
5 Benefits of Owner-Financing in Albuquerque for the Seller:
We often hear that owner-financing was designed to help one party or the other, which simply isn’t true. The terms of owner-financing are agreed upon by the parties entering into the agreement and therefore rely on each situation differently. If the terms are unfair to one party, or the other, then the deal is not made, or the negotiations should continue. It’s as simple as that. It was created to benefit both parties, but for our purposes here we are going to look at the 5 Benefits of Owner-Financing for the Seller:
If you don’t need the money from the purchase to buy a new home, then you might think of selling using owner-financing. Negotiate terms for long term gain. You can often receive higher interest rates from owner-financing than from parking it in the bank. Not to mention, sometimes buyers who can’t qualify for traditional loans, or don’t want to hassle with the process will pay more for a property just for the convenience of owner financing.
You Negotiate the Terms.
Everything is negotiable. Get creative. Make the terms as beneficial as possible. Practice those negotiation skills. And most importantly, know what you want and stand firm on the terms that matter to you.
There is a Larger Pool of Buyers.
There is a huge list of untapped buyers who can’t (or don’t want to) qualify for a bank loan. See our latest post on 5 Buyers Looking for Owner Financing.
Easier Default Process.
The default process is much easier, and quicker, than judicial foreclosure. A property can get tied up in the judicial foreclosure process for months, or even years, which can cost the seller time and money. Again, everything is negotiable, but the typical default period is 30-days. Contact an attorney to explain the details.
You Can Sell the Contract Later.
There is a secondary market waiting to buy your interest in the real estate contact. You can take your active real estate contract and sell it for cash. If you would like more information on how this secondary market works look for us on Youtube.com under Sunwest Escrow. We have an extensive list of videos for both buyers and sellers.
If you’re interested in offering owner-financing in Albuquerque on your next property contact us at 505-237-2225 to get all the information.
Owner Financing Homes ABQ
5 Buyers that are Looking for Owner-Financing Homes Albuquerque
“To some, the inability to qualify for a loan may raise a red flag. There are many reasons why a borrower may not qualify for conventional financing. It is noted that being unable to qualify does not necessarily equate to a bad credit risk or a ‘deadbeat’.“
-from Just Another Tool… Real Estate Contracts by CEO Terry White
These are great buyers. They are often hard-working individuals that can’t qualify for a loan because verifying their income to the banks can be a challenge. The banks usually require a minimum of 3 months of paystubs to prove you can pay back the loan from a steady income. If you are not able to provide 3 months of paystubs, they typically require 2-3 years of income tax returns to prove income. A new self-employed individual may be unable to show any income for years. Do you see where the convenience of owner-financing home comes in? Cutting out the bank and all their red tape makes it easier for these individuals to purchase a home.
Investors are always looking for quick, low-entry investments that they can fix and flip fast. Which means paying the remaining balance off as soon as the property has been remodeled, or updated, and sold. Dealing with banks slows the process and kills deals for investors. It’s better for them to work directly with the owner and close quickly.
People with Little, or No Credit
Banks place a lot of value in credit scores and don’t typically lend to people with little, or no credit. Credit scores do not take an individual’s income, cash, or assets into consideration. The use of credit, and a high credit score, is not the only measure of a person’s ability to pay back debt.
And, let’s not forget the young up-and-comers who are building their credit, but may not be up to the banks standards just yet.
People with Little, or No Down Payment
Conventional loans often ask for 10%-20% down, and are not flexible. But creating a sale using owner-financing can be creative; trading assets of like kind, multiple balloon payments, increase the interest rate, or increase the monthly payment. There are more solutions than I can include in this paragraph.
People Looking to Buy Unconventional Properties
Banks tend to protect their loans by using the property as collateral, knowing they can take it back and resale it for the amount of the outstanding loan, or more. They don’t typically lend money on land or properties that do not meet their standards, and processes. This does not mean the property does not have value. It simply means it’s more risk than the bank is willing to take. But to many people risky real estate purchase is often highly rewarding.
Owner-financing homes in Albuquerque is not for everyone, or every situation, but the great thing about owner-financing is that it can be flexible where conventional financing is not.
Real Estate Contract ABQ
What is a Real Estate Contract?
A Real Estate Contract is a legally enforceable agreement whereby an owner of real property agrees to sell the property to a purchaser on a deferred payment schedule. Transfer of legal title is delayed until all the deferred payments are made. When the purchaser fulfills his/her obligation under the agreement, the proper deed is released by the Escrow company and can be recorded, giving the Purchaser legal title to the property. If the Purchaser fails to meet the obligation as outlined in the Real Estate Contract, the Seller may, at his/her option, forfeit the Purchaser’s interest in the property without court action, or declare the entire unpaid balance due and payable and file suit to collect.
With Real Estate Contacts, the Purchaser does not have legal title to the subject property until the deed held in escrow is released. Instead the Purchaser has what is called “equitable title”.
Why use a Real Estate Contract?
- Terms of sale can be tailored to meet the needs of both the Purchaser, and the Seller.
- Little, or no credit of the Purchaser can keep him/her from buying with a conventional, FHA, or VA mortgage.
- Little, or no down payment may reduce the availability of a mortgage.
- A Contract can provide a monthly income for the Seller, usually at an interest rate higher than would be available at the bank.
- Usually a sale can close much faster with a Contract than with a new mortgage.
- A contract can be used to finance vacant land that could not otherwise be financed.
Why should I use an escrow company?
Your escrow company will serve several very useful purposes. The escrow company will keep deeds and documents secure. Upon payoff in full by the Purchaser, the deed held in escrow will be release for recording. Should the Purchaser fail to meet his/her obligations, a deed is safely in escrow transferring interest back to the Seller.
Secondly, the escrow company will serve as “bookkeeper” for your particular transaction. It will monitor principal, interest, and the balance of the account. It will report to the IRS on the Purchaser’s behalf as to the amount of interest paid each year. It will provide interest statements to both the Purchaser and the Seller. Upon request, it can deposit funds directly into the Seller’s bank account. Your escrow company insures that proper credit is given for each payment it receives.
Using an escrow company will eliminate many of the disputes which can arise between Purchaser and Seller. Acting as a neutral third party, the escrow company is ready to assist both parties toward an amicable relationship.
Call us at 505-237-2225 for additional information.|
For Sale By Owner
If you have a piece of property on the market as For Sale by Owner Albuquerque, then you really should consider offering owner financing. Owner financing opens the doors for so many more opportunities and new buyers.
In recent years, the Real Estate Contract (the most common form of owner financing in NM) has earned a bad reputation among the uninformed. Unfortunately, I’ve heard many real estate brokers tell me they would never advise their client to sell using owner financing because it favors either the buyer (or the seller), which is flat WRONG.
Owner financing is one way of selling real estate. A Real Estate Contract is just a piece of paper that states the terms and conditions of buying/selling a piece of real estate. There is nothing evil, or scary about either of those definitions. What matters is how the terms and conditions are negotiated. Every aspect of the process is negotiable between the potential buyer and the potential seller. If a bad deal was negotiated, then a bad deal was negotiated. Know what you want and don’t settle if you don’t have to.
The truth of the matter is that owner financing can be a great tool, but only if it fits for your situation. I’ll be blunt: Owner financing isn’t for everyone, or every situation. But if it is right for your situation the possibilities explode!
There is a huge pool of buyers who have money that are scrambling to find owner financing for a multitude of reasons:
Entrepreneurs who can’t get a traditional mortgage because of a new startup.
Investors who have reached the limit on active mortgages.
Investors looking for low investment for a quick flip.
Family members who need a leg up.
Investment groups with too many moving parts to qualify for a mortgage
To understand more about owner financing, real estate contracts, and the entire process check out our video library. And, best of luck with your for sale by owner Albuquerque listing.
Account Escrow Albuquerque
When you open an escrow account in Albuquerque, New Mexico you are securing your interest in the investment—usually real estate. An escrow account with Sunwest Escrow can provide peace of mind through securing documents on site and a trusted third-party payment history.
Consider this. You are a buyer of a new home. You’re using your lifesavings as the down payment on a home you love, using owner financing. You’ve just met the buyer through the process of buying the home, but he says he’s done this process a million times and there is nothing to be worried about. You and the seller decide to forego using an escrow company because he says their unnecessary.
So, who is going to hold the deeds? How do you know the deed will transfer ownership after all your payments have been made? How do you know who paid what? And when?
Consider the other side. You’re a seller. You’ve used owner financing to sell property a thousand times. You’re building your portfolio so you can retire soon. You like to travel and you’re very rarely in town.
Again, who is going to hold the deeds? Where are you going to accept payments? Who is keeping track? How do you get that money into your bank account so you can spend it? What if you decide to sell the contract? Do you have a trusted payment history to show potential buyers?
People travel. People change their mind. People get busy. People forget. People disagree. An escrow account with Sunwest Escrow helps alleviate these problems. Sunwest acts as a trusted third-party, or middle-man to the transaction by securely holding documents, receiving payments, holding funds in impounds for taxes and insurance, remitting funds to the buyer, and keeping a detailed history of each transaction.
Real estate is a large investment with many potential pitfalls. But many, if not all, problems can be solved with competent help. You should find competent advice from real estate brokers, title companies, attorneys, and tax professionals. And, by using an escrow account in Albuquerque, New Mexico you are adding an extra protective layer around the purchase, or sale of your real estate.
Real Estate Purchase Agreement
A real estate purchase agreement in Albuquerque, New Mexico is usually the first document in a string of documents needed to purchase real estate. Whether you’re utilizing owner financing or not, the first document in the stack of documents will be the purchase agreement. The purchase agreement is submitted by the potential buyer with the initial terms they are willing to offer to purchase the real estate. If the seller agrees to those terms he will sign and return the purchase agreement, if he doesn’t agree to any one of the terms the buyer will reject the purchase agreement and, typically, return a counter-offer to the purchase agreement. Then, it’s the buyers turn to either accept the counter-offer or reject the counter-offer and counter the counter-offer. This can continue until an agreement is met, or both parties decide to reject the terms and walk away from the deal and pursue other opportunities.
There are a few items that must be included in a purchase agreement:
- Names of the buyers and sellers involved.
- A legal description.
- Purchase amount and terms.
- Offer expiration date.
- Signatures of everyone involved.
This document is also where you can create unique terms to the agreement:
- Earnest money
- Property terms and conditions
- Allowances, restrictions, and boot (like-kind assets)
The purchase agreement is used to create the remaining documents so complete and correct information is very important. Be sure to read through the entire purchase agreement and have a lawyer review before signing. This is an important step in the buying and selling of real estate and should not be over looked. If you have any questions about the terms of the real estate purchase agreement you should have an attorney, or tax professional, in Albuquerque, New Mexico to review your options with you.
What is a Real Estate Contract?
In New Mexico, a Real Estate Contract is a legally enforceable agreement whereby an owner of real property agrees to sell the property to a purchaser on a deferred or installment type payment schedule. Transfer of legal title is delayed until all of the payments have been made. When the Purchaser fulfills his/her obligations under the agreement, the proper deed is released by the Escrow Agent and can be recorded, giving the Purchaser legal title to the property. If the Purchaser fails to meet the obligation as outlined in the Real Estate Contract, then the Seller may, at his/her option, forfeit the Purchaser’s interest in the property without court action, or declare the entire unpaid balance due and payable and file suit to collect.
With Real Estate Contracts, the Purchaser does not have legal title to the subject property until the deed held in escrow is released. Instead the Purchaser has what is called “equitable title.”
How soon after closing can I expect to hear from my Sunwest Escrow agent?
Sunwest prioritizes new set-ups by the first payment due date, but you can expect to hear from us within two weeks of closing. Your agent will send a welcome letter to both the Purchaser and the Seller outlining special services that we offer. We’ll assign an account number, and send the Purchaser payment coupons.
Purchaser: Why is the payment amount referenced on my coupons more than the amount stated on my contract? Seller: Why is the payment I received from Sunwest Escrow less than the amount stated on my contract?
The reason is probably that Sunwest has added or subtracted its disbursement fees. Contract/Notes should address which party is responsible for fees. The Purchaser can pay all fees, the Seller can pay all fees, or the fees can be equally split. If no reference is made as to who pays fees, Sunwest will deduct the fees from the Seller’s proceeds.
Purchaser: Why did I get coupons from your office and from a mortgage company? To whom do I send payment?
If the property is purchased subject to an underlying mortgage, the real estate contract usually calls for the escrow agent to make disbursements to the mortgage company from the purchaser’s total payment. While the mortgage company will continue to send payment coupons to their obligor of record, the purchaser must use the escrow company coupons because the mortgage is usually just part of the total obligation on the real estate contract.
Does Sunwest Escrow need my Social Security number?
Yes. Sunwest will contact you if your Social Security number is needed to complete the file. The IRS can impose a penalty if Social Security numbers are not of record with the Escrow Agent.
How is interest calculated?
a. “Monthly” interest is based on a 360-day year. Monthly interest is calculated as if payments were received on their respective due dates with a fixed 30-day interest period per month. This type of calculation will follow an amortization schedule. This method is also referred to as “periodic” interest or “scheduled” interest.
b. “Daily” interest is based on a 365-day year. Daily interest is calculated from the date the Escrow Agent receives payment to the next date payment is received. Weekends and holidays should be taken into consideration. Note: If the interest calculation method is not addressed in your contract, most agents will compute interest on a “daily” basis.
c. Interest only payments are calculated on a monthly interest/360 day year basis to avoid the possibility of a principal credit/interest deficit per payment. In addition, the first payment may be greater than or less than subsequent payments due to the interest start date.
Can I get an amortization schedule?
Sunwest Escrow will provide an amortization schedule upon request. If your contract/note calls for interest to be calculated on a “daily” basis, the schedule can be used as an estimate only.
What do I do if I have a change of address?
To protect the interest of all parties to a contract/mortgage, Sunwest Escrow requires that changes of address be made in writing and signed by any parties affected by such a change (ex-spouses, parties with one-half interest each). Sunwest can provide you with “Change of Address” forms.
When are late charges assessed?
Late charges vary per contract and may not even be addressed. The period of time between the due date and the date late charges are assessed is sometimes mistakenly construed to be a “grace period” similar to that of a mortgage company. Please be advised that there is no grace period on Real Estate Contracts. It is possible that a Seller will have a letter of demand issued PRIOR TO the date late charges are assessed. The demand letter engages the start of the “default period.”
What is the default period on contracts?
The default period is defined as the number of days from the date a Demand Letter is mailed to the date the Escrow Agent must receive all payments demanded. About 90% of all contracts use a thirty day default period.
If a demand letter is sent, who pays the attorney fees?
Contained within all contracts should be a reference to the exact amount of fees the Purchaser shall pay if the Seller’s attorney makes written demand for payment. The Purchaser is responsible to pay these fees along with payments demanded within the allotted time. Sellers may write their own demand letters, but may not in that case demand attorney’s fees.
What happens once the default period has expired?
Once the default period has expired, the Escrow Agent is required to release the deeds held in escrow to the Seller or the Seller’s agent upon presentation of a “recordable affidavit” of Default.
Once payment is received, how long does it take to send payment to the Seller and to any underlying mortgage company?
While payments may be processed on the day they are received, processing may take up to 72 hours. Some escrow agents have a 24-hour turnaround time, while some require three to five days. It is important to know your agent’s processing time to account for late charges that may be assessed by underlying mortgage holders.
What happens if Sunwest Escrow receives a Purchaser’s check back from the bank due to insufficient funds?
Normally, payment is sent to the Seller/Mortgagee before a Purchaser’s check has cleared the bank. The Escrow Agent may then assess a service charge and/or require cure for the returned check in the form of certified funds (cash/certified check/money order). The agent may also have a policy requiring future payments to be made with certified funds. Since each case is unique, in the event this situation arises, contact Sunwest Escrow directly.
Will Sunwest Escrow accept payment by cash?
Some escrow companies will accept cash, while others require checks or money orders. Sunwest Escrow has an arrangement with a local banking institution to accept cash payments for Sunwest.
Will the Purchaser get a receipt when payment is made?
Sunwest Escrow will provide a Purchaser receipt upon request. A fee is charged to mail receipts to Purchasers, but if the Purchaser makes payment in person, a receipt can be requested.
Can a Seller request that payment be sent directly to his/her bank?
Yes, monies can be sent directly to a Seller’s bank account in most instances. Although some escrow companies charge an additional fee for this service, Sunwest Escrow does not.
Will Sunwest Escrow hold monies in reserve to pay the property taxes and hazard insurance?
Sunwest will hold monies to pay taxes and insurance for clients. We ask that the Purchaser be responsible for providing tax bills and insurance premiums to Sunwest Escrow for payment.
If the Purchaser pays the taxes and insurance premiums, is he/she required to let the Seller know?
The Real Estate Contract should address the proper procedure for notifying the Seller of taxes and insurance paid. Most standard forms require the Purchaser to have the property assessed in his/her name with the county assessor’s office to guarantee receipt of future tax billings. Upon request by the Seller, the Purchaser will provide proof of taxes paid. Most contracts further require the Purchaser to automatically provide proof to the Seller that insurance is in force prior to the expiration date of each existing policy. Purchasers and Sellers should familiarize themselves with the requirements for tax and insurance payments and notifications, as outlined in their Real Estate Contract.
When and why does the Purchaser make the underlying mortgage payment through escrow?
Real Estate Contracts will usually address whether or not the Purchaser’s underlying mortgage payment is to be made through the Escrow Agent. If the parties have agreed that the mortgage payment is to be made through escrow, the Escrow Agent is unable to accept the Seller’s equity payment unless it is accompanied by the mortgage payment.
Having the underlying mortgage payment go through escrow protects both parties. The Purchaser has the convenience of making just one payment per month. In addition, he/she will have assistance should a payment fail to reach the mortgage company or should information received from the mortgage company be unclear. The Seller will have proof that the underlying mortgage is being paid and that his/her interest is being protected.
Can the Purchaser sell or assign Purchaser’s interest in the Real Estate Contract?
Contracts may require the Seller’s consent to sell, convey, or assign Purchaser’s interest. If no consent is required, Purchaser’s interest can be transferred without Seller notification.
Can the Seller sell or assign Seller’s interest in the Real Estate Contract?
Yes, Sellers often sell or assign their interest to another party. Note: Sunwest Escrow will notify all Parties to the account when they are in receipt of a Purchaser or Seller assignment.
What is a “wrap around contract”?
A “wrap” exists when the property sold on a contract is subject to an underlying lien that the Purchaser DOES NOT ASSUME NOR AGREE TO PAY. The lien remains in the Seller’s name and remains the Seller’s responsibility. The contract will usually instruct the Escrow Agent to pay the wrapped lien from the Seller’s proceeds. At the time of payoff of the contract, the Seller provides a release for the underlying lien or obligation.
Can the purchaser pay extra monies to be applied to the principal balance at any time?
To simplify record keeping, and to avoid additional escrow fees, it is usually best for the Purchaser to make principal payments along with the regular monthly payment. A note should be made on the payment coupon indicating that the overage is to be applied to principal. As long as the account is current and there is no accrued (unpaid) interest, overages will be applied to the principal balance.
Will I be furnished with an interest statement to use for tax purposes at the end of each year?
All contract payors will be provided a 1098 statement of interest for tax purposes. Contract sellers can refer to their payment remittance notice for the year-to-date principal and interest earned. Sunwest Escrow is only required to report interest paid to the Internal Revenue Service.
When I have a problem, who do I contact?
Contact your realtor if:
1. You have questions regarding your purchase agreement.
2. You have questions regarding keys.
3. You have questions regarding repairs.
4. You have concerns with fixtures or other physical aspects of the dwelling as outlined in your Purchase Agreement.
Contact your title company if:
1. You have questions regarding your closing statement.
2. You receive a late notice from your mortgage company regarding the first payment made through the title company.
3. You have questions regarding your first water bill.
4. You have questions regarding payment of your first year’s insurance premium or property taxes.
5. You need to know if your documents have been sent for recordation (usually a copy will be sent to you 1-2 weeks after closing).
6. You need a copy of your survey, title policy, or closing statement.
Contact Sunwest Escrow if:
1. You have not received payment coupons and first due date is approaching.
2. You receive a late notice from your mortgage company and you have already made payment to the escrow company.
3. You receive new payment coupons from your mortgage company or if you receive notification that they have sold your loan.
4. You do not understand how interest is being calculated.
5. You need the current balance of your Real Estate Contract.
6. You do not understand a letter you have received from either the mortgage company or the escrow agent.
Contact your underlying mortgage holder if:
1. You question why your payment increased relative to tax and insurance reserves paid by the mortgage company.
2. You want to find out your mortgage balance and/or current interest rate.
3. You need to know how much the mortgage company paid for the year’s taxes and insurance premiums.
4. You want to find out if your mortgage is assumable.
Still Have Questions?
Don’t hesitate to reach out to us anytime
10600 Menaul Blvd NE, Albuquerque, New Mexico 87112
P.O. BOX 36371 ALBUQUERQUE, NM 87176