“Owner Will Carry” (OWC) Deals and How They Work
Most properties you see on the market that are available for “owner carry” do not have have a mortgage on them. Most were purchased by an investor for cash and fixed it up to make a profit. This means there is a high probability that you will be paying over market price to get one. If you have a significant other participating in this decision, now would be the time to have this discussion as we charge a non-refundable $1000 fee to handle your escrow once all parties have accepted the terms.
What does the process for purchasing an owner carry house look like?
1. You must prove that you have a down payment before an agent drives around to show you properties. A snap shot of your bank account (minus account numbers) or a statement from your banking officer will work just fine. Got cash? No worries. Take a snap shot of all those Benjamins next to a newspaper. Don’t laugh. Happens frequently.
2. One of our agents will show you houses that fit your financial profile. Keep in mind there are about 130 available in Las Vegas and probably about 4 that fit your financial profile. If those 4 don’t work, you will just have to keep waiting.
3. IF you find the house you like and IF the seller doesn’t have a better offer and IF you make a decent offer price, we will go to the next step of haggling over financial terms.
4. Once all terms are hammered out verbally, we get down to business of putting this down in writing and opening escrow. Your 20% down will be held in escrow with a title company until the property closes. If the property fails inspection or the property falls out of escrow, you will get your money back. We will retain $500 of your initial fee as this effort is a lot of work.
5. Escrow generally takes about 3 weeks. Once the property closes, you will be making payments to a servicing company who records your payments and then disburses the money to the owner.
6. At the end of your financial agreement, you will either have clear title OR secure another mortgage to pay off the “balloon” to the owner.
What are typical financial terms?
These describe the most common but there are a zillion variations.
5 Year With Balloon – During the 5 years, you will be making some type of payment that is principle and interest OR interest only. At the end of the five years, you will have a balance due. This balance due is referred to as a balloon. It will be your responsibility to find a mortgage at the end of the 5 years to pay this balloon off.
5 Year Principle & Interest – The wisest financial path to take is to just pay the whole loan off in 5 years. At the end of the 5 years, you own the property free and clear.
10 Year Principle & Interest – If you can find an owner willing to carry a note for 10 years, this is the sweetest thing you can find! At the end of the 10 years, you own the property free and clear.
What happens if I fail to pay on time?
There will be conditions of your note to the owner that spell out the consequences of not paying on time. Typical consequences are late penalties. However, if you go beyond the boundaries of the agreement, the owner can foreclose on you and take repossession of the property.
Will I be on title and get the tax benefits associated?
Yes. This is the largest benefit of an “owner carry” deal.
Can I choose who services the note or handles title?
Yes. We don’t care who you use. We will provide you a list of who we like but ultimately both parties have to agree.