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Will I Get My Homeowner’s Exemption if I Offer Owner Financing?

Here’s an email that floated in this morning . . .

“Hi,  I just did a google search and found your site, so much info!  Basically if I’ve owned and lived in my home for 3 years, and now thinking of doing owner finance (still have a mtg), can I still get my $250K exemption with owner carry?  How is that generally structured?   Say they don’t have great credit, but have $20K to put down but want a 15 year carry, do I have to claim that income each year? Thanks, Joy”

Dear Joy,

Although my standard disclaimer is that I’m not an accountant and that you should consult your own before selling property or paper . . .

My understanding is that yes, you will retain your home owner’s exemption when you transfer title, regardless of how the property is financed.  If you use the Title Holding Trust to assign an interest in the property to a Resident Beneficiary, it’s a moot point until the trust is terminated anyway, as it won’t count as a sale until then.

There are just a few questions you’ll probably want to ask yourself as you consider putting this deal together:

  1. Based on the value of my property, is $20,000 a strong down payment?
  2. If they default, what will it cost me and how long will it take to regain possession of the property?
  3. Do I have good underlying financing to leave in place for the next 15 years?
  4. What would the buyers and I do if the bank decided to ‘call’ or accelerate the loan?
  5. Am I willing to leave some of my equity on the table now in exchange for a piece of any appreciation down the road?
  6. What do I really need out of this transaction? 
  7. Will there be a negative cash flow?  If so, how easy will it be for me to absorb it?  Will it affect my quality of life?

There’s more, but this would be a good start.  If you haven’t already, sign up for Seller Financing on Steroids at the top of the site.

If you’d like some help making sure you don’t have some unexpected regrets down the road, you can always hire me to be part of your professional team.  I’ve recently revised my fee structure.

Additionally, I’ll have a teleseminar you can sign up for later this month if you like.

Best wishes,


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