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Protect Your Finances and Make Better Profits on the Sale of Your Home

Aug 18, 2007
Owner financing can be very profitable, as long as you take steps to keep yourself safe throughout the process. I'd like to show you four ways to both protect your finances and make life a lot easier if you decide to owner-finance your property.

(1) Make sure you do a background check on any potential buyers. With all the new laws regarding sex offenders, you could easily find yourself in a bad situation if you sell to one and break the law in doing so. Background checks can also save you from any potential fraud or con games along the way. And, if your buyer runs a drug lab (such as methylamphetamine), the government could seize the house and cause all sorts of problems for you. It's best to avoid these situations -- and any others -- with a simple background check.

You can find a multitude of background check companies on the Internet. Just enter "background check" in the search engine and you should find plenty that can help you. The average cost is $25 to $50, depending on how much information you want. And this simple step could definitely save you a lot more money down the road.

(2) Ask for references and check them. Make sure their job checks out. And character is important too. So call a few of the professional and personal contacts as well. You want to make sure the buyer is trustworthy.

(3) In addition to a background check, you must run a credit check. After all, you don't want to require mortgage payments of someone who has a history of not paying bills. There's no guarantee they'll change their ways once they have to start paying you. You can get a credit check through any of the major credit organizations. These include Equifax, Experian, and TransUnion.

(4) Finally, establish in your contract specific limits on when you will allow pre-payments. If you allow prepayments any time, it makes the amortization very difficult (you can find out more about amortization, including how to build a table, at www.bankrate.com). So I suggest you allow pre-payments one time per year. It's easiest if you limit it to the note's anniversary. It will make your calculations much, much easier.

Once you've taken care to cover your bases, owner financing is a great way to sell your house faster and make more money on it. But you've got to do your homework. Otherwise, it could be a major headache.
About the Author
Steve Kroening writes for Success magazine and also publishes Wisdom's Edge. You can get Biblical tips on health, finance, relationships, parenting, and success, delivered to your email inbox every week. Simply visit http://www.wisdomsedge.com and sign up for this free e-zine.
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