"Owner will carry" financing as a comp

[jonhig]

Do you all typically steer clear of a comp with this kind of financing? I am doing a manufactured home and I have no other comps to choose from at all! I am reluctant to put it in there b/c it is obviously advantageous financing. I can't just through a negative adjustment out there either. Your thoughts would be much appreciated, thanks.

 

[PropertyEconomics]

Do you all typically steer clear of a comp with this kind of financing? I am doing a manufactured home and I have no other comps to choose from at all! I am reluctant to put it in there b/c it is obviously advantageous financing. I can't just through a negative adjustment out there either. Your thoughts would be much appreciated, thanks.

How do you know its "advantageous" financing? How does it compare with market rate financing?
Have you ever done a cash equivalency?

All questions to answer.

 

[lostinthezone]

You shouldn't use it without knowing the specific details of the financing and being able to compare it to typical market financing. If you know all the details, i.e. have a copy of a contract or financing agreement, I wouldn't have a problem using it.

 

[jonhig]

I am just assuming it is advantageous. This type of financing was used probably b/c the buyer could not get approved by a lender correct? I'm sure there are other situations, but this is the most likely scenario. There is no info about the sold rate, loan amount, etc. I have never done a cash equivalency before and I really am not excited about that kind of talk. lol.

 

[jonhig]

You shouldn't use it without knowing the specific details of the financing and being able to compare it to typical market financing. If you know all the details, i.e. have a copy of a contract or financing agreement, I wouldn't have a problem using it.

My only hope is to get a call back from the realtor and I'm sure that'll happen!:new_all_coholic:Guess, I'll just have to trash it.

 

[PropertyEconomics]

I am just assuming it is advantageous. This type of financing was used probably b/c the buyer could not get approved by a lender correct? I'm sure there are other situations, but this is the most likely scenario. There is no info about the sold rate, loan amount, etc. I have never done a cash equivalency before and I really am not excited about that kind of talk. lol.

Jon .. In this market climate it may not have to do with the borrower but more that there are no loan programs to handle the product. Many times a seller is in a position they dont want cash due to tax consequences which are lessened by receiving the payments in installments. Not saying it isnt the borrower .. but until you call and find out you simply wont know. Make the call and talk to the seller ...
If you are not excited about "cash equivalency talk" perhaps its a good time to look for something else to do, with all due respect. I suspect as this market moves forward .. cash equivalency will become more important and an appraiser will need to be able to do it.

Until you ask the questions .. you wont know the answers.

 

[The Dog]

Read your definition of market value that you are certifying. An owner carry can be good or bad, bank financing can be good or bad. There is nothing that prevents owners from carrying, or automatically makes the sales bad.

Over the last ten years, I have bought and sold numerous properties, both rentals and first homes and everyone but two were owner carry. There was nothing funny on the Owner carry. All were at market terms.

If you have a problem with OWC, how about sales outside of MLS. In my market that is around 55+%. Should we not use them either?

Verify, Verify, and Verify again.

 

[Terrel L. Shields]

probably b/c the buyer could not get approved by a lender

consider
A - the property type (MH) may not be approvable, the borrower may be "OK"
B - there might be a tax advantage or a percieved tax advantage by the seller to delay payment into a future year
C - the terms may be been more favorable
D - the borrower might have some future windfall anticipated and seeks a short term Owner finance as a cheaper form of "bridge" loan
E - or, as you say, the borrower might have a low credit score

 

[Doug Meyer]

Many years ago when interest rates were over 17% owners would carry contracts and/or would hold 2nd mortgages and we still used those sales, well because they were sales. As long as they were market sales with no unusual terms, or were over priced they can be used. Cash equivalency is the best.

 

[Mary Tiernan]

Another item to consider, especially in the manufactured housing market - a large down payment is required for manufactured houses by a lot of lenders. Now, in my market, the typical purchaser of a manufactured house will not have a large down payment (25% is typical). Also, if the manu house has been moved, it is not eligible for FHA which requires less of a down payment. I usually state the limited financing options for manufactured houses and the resultant owner finance issues - then land contract sales are already explained.

Another issue is that financing is a lot easier once you are the owner of the property - then any equity is yours, not the sellers', and your down payment requirement is lowered due to the equity in the house.