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Sale on Contract – how much of a premium?
I’ve decided to sell my house on contract… does anyone now how much I should mark it up over fair market value? (since it is traditionally preferred to have a traditional sale/transaction)
Many thanks!
Where you make the money is not on the mark up of the sales price it is on the interest you charge over a negotiated period of time on the balance you finance. If you mark up the price too much you won’t get a buyer.
Since typically a land/real estate contract is based on someone coming into it with a low downpayment the standard is to be at least 2 points minimum above the going rate of the local lender. Since all local lenders now adjust their in house loans to 3 years (balloon) you should have the same language in your contract. So first go to the bank and ask them what they would offer to a buyer and go from there. Remember that a balloon does not necessarily mean that you will need to have the entire principal balance at the time of the balloon paid off it just means that at that date you will have a chance to re-establish the interest rate at the then going rate plus 2 or whatever rate above the going rate you negotiate with a buyer. The key to owner financing is knowing what the forms are that will be needed and all the terms and conditions that need to be addressed, so I would encourage you to work with a licensed professional that has done them. We do them all the time here in NM.
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