First, I must proclaim that I am NOT an Attorney and in no way am I attempting to give legal advice.
My question is, "how SAFE is it to owner finance in Texas?"
I received a call from a friend yesterday and she was asking me about the potential of OWNER FINANCING her Texas home. She explained that a couple had viewed it and said their credit was not up to par and would the Seller consider holding the note. This answer was a no-brainer. It was a big fat "NO". Their home is still mortgaged which caused the obvious problem. ARMS LENGTH MORTGAGES ARE ILLEGAL IN TEXAS. In fact, if you go into a contract stating you will finance the home for them and you consider it a sale, it is my understanding that your note holder will call your note due and payable immediately!!! If you've sold the house they want their money!
BUT WAIT THERE'S MORE! HOUSE FLIPPERS BECOMING A DYING BREED...
As Realtors, and Mortgage Pros and all of us that are involved with this business it seems we have to pay attention to LAWS OUTSIDE OF OUR PROFESSION to stay on top of things. Yes, yes, we all know this but with the changes being made every day it's tough to keep up.
Are you familiar with the 2010 "SAFE ACT" IN TEXAS HOUSE BILL 10?
“Secure and Fair Enforcement for Mortgage Licensing Act”)
I was not familiar and came across it quite by accident. What an eye opener it is.
The bill states that, Under the current code, owner-financiers must have a Residential Mortgage Loan Originator license from the Texas Savings and Mortgage Lending Department.
Once upon a time we were allowed up to 5 transactions a year...kind of like flipping cars. This restriction is just unimaginable! It seems to me that if the sales took place at a legal Title Company with legal paperwork, the government shouldn't be able to tell us what we can or cannot sell!!!!!! Come on now! They are now saying not even ONE owner finance per year with a few exceptions.
If you own the home free and clear and it is your homestead.
If you sell to a family member.
Or, use a Third Party Mortgage Originator...there goes the profit!
AND IF YOU DO IT ANYWAY ARE THERE REPERCUSSIONS?
Oh my, YES. If you are caught doing it anyway you are subject to a $25,000 fine, you may owe damages to the Buyer and well, isn't this all bad enough?
So, FLIPPERS BEWARE!
Check out my website at: www.debs-realestate.com.