State Specific Question About: ALABAMA (AL)

I have two tenants in two separate properties who would like to buy the house they live in. Each has credit and/or divorce issues, however they are nurses and can afford a house payment. One is a Vet.

I am open to selling the houses in about 3-5 years time. I would be willing to rebate part of the rent paid to facilitate the deal vrs. paying a realtor.

Why not say, "I'll offer it to you first, before I put it on the open market, but it won't come up for sale before 2023 at the earliest. So make sure your credit's in good shape, and work on saving up a down payment, so that you won't have any problems getting a mortgage when it comes available."

And then keep on collecting rent for the next 4 or 5 years.

But when the time comes to sell, be a seller, and get one big check from the bank, and stop worrying about the house.

When you straddle the two identities, and try to play both seller and lender by owner-financing, sometimes it works, and sometimes it doesn't. But you don't want to be in a situation where you have to foreclose on your former tenants because they've stopped paying you-- you want to be on the beach, doing something fun with the money, now that you've decided to shed the rentals.

I was chatting with someone who used to live in my personal residence. His father had sold it, owner-financed, in the 1970's or early 80's. He mentioned that the buyer had paid nicely for about a year-- but then he stopped paying and declared bankruptcy. And because the house was his primary residence, it was protected from being taken away from him. So the guy's father only had a year's worth of payments-- and the bankruptcy totally wiped out the rest of what was owed.

IF and When,

In my State, if a tenant pays towards ownership, like an extra monthly fee added to the rent for the future down payment, then they are an OWNER BY CONTRACT. And as such, can not be evicted. In California co-owners can not be evicted even if they pay the bills, rent, etc.

No "option to purchase". No "rent rebates".

When you are ready to sell, mention that to them and let them purchase, if they are still interested, if their credit is good and they are able to arrange financing.

You agree on a price at that moment, sign a "deposit receipt" and take a deposit check.

If your credit is good enough for me, it is good enough for the bank to give you a mortgage. I won't carry paper.

Some years ago I had some situations like this that didn't work out. However, I have two now that have been very good.

Last Saturday, March 31, I sent this text message to one of the families, who as usual paid early, despite it being a holiday week-end. "Another timely mortgage payment I think other persons doing owner-financing would wish for persons like you."

Fron the day they first saw this house they immediately wanted to rent it and also expressed interest in buying. After two years of their being great renters, I finally starting to be in selling mode because of my own medical issues - and I told them I was ready to sell to them.

We agreed I would owner finance for up to three years. We used their security deposit plus a little more as their down payment and worked out things so their mortgage payment would be about the same as their rent payment had been. Within a day of their being owners they began doing various small and then more ambitious improvements to the house and yard. Both they and I are delighted with how things are going.

A block away from this house I had renters who had been in their home for 20 years. They wanted to buy, but every time they had money saved up for a down payment to me they had something that came up that prevented our proceeding. The wife lost a job and found another that didn't pay as well at first, the husband had an illness with a slow recovery, and then a couple of other times they felt that helping a relative with a serious need was even more important for use of their savings than their becoming home owners.

Eventually all worked out. They now have been there 27 years, with the last seven as buyers with my financing.

These two are ones that have worked out well. I had three others that eventually worked out, but not easily. And then I had several that ended up with my having the house back - some because of death of one of the adults (who didn't have adequate insurance) and some because the couple just wasnt capable of being responsible home owners.