When it comes to selling a home, most transactions follow a traditional process: the seller lists their home, a willing buyer is found, and a bank loans money to the buyer who then pays the seller. But what if there was a way for sellers to skip the hassle and uncertainty of a traditional sale and for them to get more than their asking price? There is! And Good Vibes Homebuyers (GVH) are industry leaders at it.
The solution is owner financing your home, also known as “seller financing,” which is GHVs Sell for More solution. This article shows you how owner financing a home works in Texas and explains its benefits and disadvantages.
What’s in it for you
1. What owner financing a home means and how it works
2. Reasons homeowners consider seller financing their home
3. The pros and cons of owner financing a home
4. How sellers can protect their selves in an owner financing agreement
Owner financing a home in Texas means that the seller takes on the role of the lender, which would typically be a bank in a traditional financing transaction. But instead of providing cash to the buyer, the seller extends credit in the amount of the agreed upon sale price minus the buyer’s down payment. At closing, the buyer signs a promissory note which details their promise to repay the owner financed home loan. As security for the promissory note, the buyer signs a deed of trust which allows the seller to take back the house should the buyer default. The deed of trust is recorded in the real property records of the county in which the home is located, thereby creating a lien on the property in favor of the seller.
The buyer then, like a traditional mortgage arrangement, pays the seller a set amount each month. In short, seller financing a home in Texas is like a traditional sale, except for 3 differences:
1. Instead of a conventional bank, the homeowner owns the debt and gets all the benefits of being the bank.
2. The owner financed home loan is short term – typically, 3 to 10 years with a balloon payment due to the seller at the end of the seller financed term.
3. Because a conventional lender is not involved, seller finance arrangements are much faster and closing costs are much cheaper.
The primary reason to seller finance a home is that Good Vibes Homebuyers can pay homeowners a lot more, even more than market value. In addition, seller financed home sales reduce transactional costs which means that sellers pay zero closing costs and realtor commissions, GVHs closing costs are less, and we pass those cost savings onto you. Other reasons an owner seller finances their house are situations where they want (a) to get the highest sale price, (b) to save on taxes, (c) to earn passive income, (d) to sell “as-is” without having to pay out-of-pocket for repairs, (e) a free, fast, and easy closing, and (f) to get paid 3 different ways (large down payment, monthly payments, and large lump sum at the end of the term).
Our goal at Good Vibes Homebuyers is to empower homeowners with the information needed to make the decision that best addresses their personal wants and needs. To that end, no matter the method for selling your home, each has their advantages and disadvantages, and owner finance offers are no different. So, what are the pros and cons of selling a home in Texas with owner financing?
a. Sell for more than market value: With our Sell for More offers, GVH can pay more than market value for your house. Here’s how: (i) conventional financing costs are eliminated, (ii) the interest payments a seller receives are added to the sale price, and (iii) the term allows time for the property’s value to increase, and that value increase is passed onto you via a higher sale price.
b. Lower tax on interest payments: When you sell and owner finance your house to Good Vibes Homebuyers, we pay homeowners interest in the form of a higher sale price. This means the payments you receive are taxed at the capital gains tax rate instead of your personal income tax rate. Capital gains tax ranges from 0% to 20% while personal income tax rates can be as high as 37%. And because interest payments are included in the sale price, sellers do not have the tax reporting obligations that would be required of interest income.
c. Save on taxes: Unless it’s your registered homestead, if you sell any way other than owner financing, 100% of your capital gains tax is owed to Uncle Sam in the year you sell. This can push you into a higher tax bracket. With seller financing arrangements, homeowners spread out their tax burden over several years. Below is a recent, real-life comparison of a homeowner who seller financed their home to GVH instead of selling on the MLS:
d. No inspections, repairs, surveys, and appraisals: You already went through this process when you bought your home, and because sellers get to be the bank in an owner finance transaction, there is no need to repeat these time-intensive steps.
e. Industry leading 5-day close: Homeowners who prefer easy and fast cash and a quick closing can use owner financing to sell a home in as little as 5-days with GVH.
f. Get paid 3 ways: When closing your home’s owner finance transaction, sellers receive a large down payment, monthly payments throughout the term of the loan, and a large lump sum to pay off the note in full at the end of its term.
g. Monthly income: Homeowners who owner finance when selling a home to GVH receive regular cash flow which can be thousands of dollars per month resulting in extra dependable, and spendable income.
h. Control: Like a conventional transaction where a local bank underwrites a home loan and later sells that mortgage to another bank, you have the same control! This means that you can sell the promissory note and deed of trust to someone else at any time and for a profit.
i. Being the bank is good: If the buyer defaults, sellers get to keep the down payment, all monthly payments, and, most importantly, the house - and you can start the owner finance process over again with more equity (GVH has never missed nor made a late payment).
a. A tad more risk. Since sellers are extending credit like a bank, in case of default by the buyer, like a bank the seller would have to go through the foreclosure process to regain possession of the home.
b. Not all proceeds received at closing: Homeowners who seller finance their house are providing a non-cash loan to the buyer and therefore not all proceeds are received at closing. Sellers can receive, however, a down payment as high as 65% of the sale price with Good Vibes Homebuyers.
Owner financing houses in Texas means that a seller takes on the role of a traditional bank, however, Good Vibes Homebuyers realizes that our seller finance arrangements are with real people who count on us to follow-through on our promises. To that end, sellers receive the following protections:
a. Bank draft: Our commitment is to pay you in-full each month the agreed upon monthly payment and all other financial obligations related to the home, including paying off the note we have with you at the end of the term. At closing, we will collect your banking info so that recurring monthly payments can be made via ACH deposit into your bank account.
b. Multiple assets we can borrow against: Good Vibes Homebuyers owns over 25 properties with significant equity that we can borrow against to meet our financial obligations to you.
c. Cash account: Good Vibes Homebuyers maintains a cash account exceeding $750,000. Our secure financial position guarantees that we’ll be able to meet our financial obligations to you.
d. Credit report and background check: If preferred, we will provide a current personal credit report of our 2 owners who have maintained a minimum credit score of 785 since 2016. We will also provide a background check to show a history of good vibes only.
e. Your loan is secured by the home: When a homebuyer doesn’t make payments to the bank, the bank can take back the home. And remember that homeowners planning to sell a home with owner financing get to be the bank? At closing, sellers will receive a promissory note which is a document signed by the buyer that promises to repay the seller financed home loan. A deed of trust is also signed and notarized and recorded in the county’s real property records which establishes a lien on the property in favor of the seller.
Although GVH guarantees all obligations to you will be met, playing devil’s advocate, if we don’t, the situation is not terrible for sellers. Why? You would keep the cash down payment received at closing, all the monthly payments, and you would take back the house and capitalize on any improvements and appreciation that have taken place since you used owner financing to sell your home. Make no mistake, we do not want to be foreclosed on, meaning we are highly incentivized and committed to following-though on all our commitments.
When you contact GVH, one of our local managers will call or text you to introduce themselves and to learn about the home you’re selling. Within 2 hours of our discussion, we will call or text you to present you with multiple ways to seller finance your home. These offers are preliminary and dependent on visiting you and your home in-person or virtually to assess its condition (beware: investors who do not request to see or allege that they do not need to see your house is a red-flag).
After meeting you and seeing your home, we will finalize your offers within 24-hours and guarantee that the seller finance offer you accept will not change. There is no obligation to accept any owner finance home offer and we will freely and truthfully discuss other options for selling your home that may be a better fit for your unique situation – including options that do not involve selling to us. Below is an example of what your seller finance offers will look like:
In every home owner finance situation with GVH, people interested in seller financing their home have the power to choose 2 of 4 variables:
For instance, home owners can sell for more than market value and receive high monthly payments. This reduces the down payment and extends the home owner finance term. Conversely, a large down payment and short finance term limits the sale price and down payment. These 2 combinations are not exclusive meaning that homeowners can pick any 2 variables. One final thing, did you see that we show our profit to you? We guarantee you’ll be hard-pressed to find even 1 other investor who does the same. At Good Vibes Homebuyers we believe in honesty and integrity and in creating equitable, win-win deals.
Sellers who opt not to continue are never hassled or pressured and are left armed with a free comps report and the knowledge necessary to make the best decision. But because we can pay more with our seller finance home offers, many sellers before you have chosen to proceed with selling and owner financing their home to Good Vibes Homebuyers. The process thereafter is a breeze for sellers and is explained within our FAQs.
1. How is closing handled when selling my home via owner finance?
When a seller owner finances a home to GVH, we close with a local title company who is experienced in buying and selling homes with owner finance agreements. Sellers pay zero closing costs, there are no hidden fees, and we can close in as little as 5 days. At the following links you can find the contact information of the title companies we regularly use in Bell County and the Austin to San Antonio areas. We encourage you to reach out to them to verify our existing relationship and proven track record.
2. After I sell, do I have to pay for things like maintenance, HOA dues, insurance, property taxes, etc.?
No. After you seller finance your home Good Vibes Homebuyers pays all financial obligations associated with the home.
3. How does seller financed homes benefit Good Vibes Homebuyers?
Two ways: first, like you, we don’t like inspections, appraisals, or banks. With owner financing, we can simplify the process tremendously. Second, we typically buy houses with all-cash, but with seller financing, we can buy homes without needing as much capital, which allows us to preserve funds for future opportunities that come along.
4. If I have a mortgage, can I still sell my home with owner finance?
Yes, and seller’s pocket the difference between our payment and the exiting mortgage payment. At closing, seller’s sign a limited power of attorney which gives GVH the legal ability to set up ACH draft payments to the mortgage company from GVH’s bank account.
Our Sell for More, seller financing solution means that homeowners can sell a home for the highest price possible, even more than market value!
You avoid showings, staging, and can sell as-is without having to pay out-of-pocket for home repairs. Our full-service solutions means that homeowners can close in as little as 5-days and do not have to pay closing costs and realtor fees. Just as good, the Texas home you owner finance can be the gift that keeps on giving by paying you 3 separate ways while reducing your tax burden. It’s time for you to thrive with Good Vibes Homebuyers! Contact Phil and Will today!
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