With so many lots on the property, you may be wondering what you can do to help yours look more attractive to buyers. One of the best things you can do is to offer owner financing.
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In the economy these days, many hopeful buyers are having trouble getting the home equity loans that they used to. So obviously they don’t have the cash on hand that they did before. Also, their properties in general have gone down in value, and many have a property on the market, waiting for a sale. As a result, we have many buyers who want to buy, can’t get a bank loan either in the U.S. or in Costa Rica, but expect to have more cash in the next few years.
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You can appeal to these buyers by offering to finance the property yourself. There are many benefits to doing this:
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1. You can sell your property more easily.
2. You can sell your property for more than if it’s all cash.
3. You can make money on the interest… usually higher than you’re going to get in other investments (7-9% is common here).
4. If they don’t pay, you can get the property back and sell it again!
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I recommend two types of owner financing:
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A) Ask for 50% down, and the rest over 3-5 years, at 7-9% interest. Sell at the market rate. This will get your property sold quickly if the price is fair also.
B) Ask for 20% down, sell the property for more than you might otherwise get, and offer 10-20 year terms. With this option, lots of people can now afford your property. It becomes an excellent long-term investment for you.
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There are three ways the mortgage can be held:
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I) Private contract (not advised – difficult to enforce.)
II) Registered Mortgage (This is very safe. It costs less than option III, but it takes longer to get your property back if they default… it can take 1-3 years if they try to fight it.)
III) Trust Agreement
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The last of these, the Trust, is the best way. A Trustee company will hold the title of the property, and will turn it over to the buyer once they have fulfilled all their obligations. If they don’t fulfill them, your attorney writes a letter to the Trustee and they sign the property back over to you without going to court. This takes just a couple of months to complete. The banks always do it this way because they know it’s safe and easier for them. The downside of a trust is that it costs more… somewhere around $2000 to set it up and there’s a yearly management fee of $500+ as well.
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Geoff McCabe
CEO, Tropisphere