OWNER FINANCING IN THE DOMINICAN REPUBLIC – Summarized*
Just about everyone knows about mortgages, or third-party financing, where a bank or other lending institution provides a loan to the buyer that the BUYER pays back over time; However, when a BUYER cannot get financing through a lender (or just decides not to), sometimes the SELLER will provide financing to the BUYER.
Bank loans are extremely difficult to achieve by a foreigner in the Dominican Republic who does not reside in the Dominican Republic; and/or cannot show enough proof of funds or assets set by the Banks here. Additionally, Bank loan interest rates are very high between 9% -12% (2020), and most loans are Adjustable Mortgage Rate Loans. Rates are set by the Dominican Republic’s Central Bank, which will fluctuate. Since 2008, I have never seen mortgage rates in the Dominican Republic go below 7.5% (and still with tight terms). Meaning your APR, even if you can fully secure a bank loan here, could become a financial risk
Owner Financing or Seller financing here operates very similar to a bank mortgage in North American (Canada and the U.S), but for a much shorter term. The BUYER pays the SELLER a pre-determined down-payment amount then additional payments are paid in regular pre-determined intervals until the loan amount is payed off.
It should be noted, Banks in the U.S. do not provide loans for property purchase in another country. This is because there are very little jurisdictions by a U.S. bank should there be a default. However, Americans can use any un-used equity in a current U.S. mortgage loan.
Typical Owner Finance terms here, with a cash down-payment of 40% - 50% down, would be for 4-6 years, at 4-6% interest. Enough time to receive your investments or pensions IRA, 401K, SS, (Americans) or RRSP, CCP or OAS (Canadians) … or perfect timing for other assets to be freed up, or debts/ loans to be paid off.
Q. When Would You Use Owner Financing?
- When the BUYER is having problems qualifying for a bank loan here, and has little home equity built up, or little available from his current mortgage, and within his/ her home country. Owner Financing offers the BUYER another option for purchasing the home. A BUYER might even have an easier time negotiating the home price, interest rate, or other details with the homeowner rather than through a traditional a bank, or other lender.
- The property SELLER is having trouble finding a BUYER. If the property has been on the market for a long time, or there exist a lot of like-kind competition, and the SELLER decides to offer owner financing, they immediately have access to a whole new group of potential BUYERS that may have otherwise been discouraged from looking at the property.
Q. How Does Owner Financing Work?
Owner Financing works exactly how it sounds – the property owner provides financing in the form of a loan to the person who buys their property.
The basic process usually starts with the BUYER and SELLER agreeing to the details or terms of the sale. These terms are then expressed in a Purchase Offer, or Purchase Agreement, which must be signed by both parties before a Promise of Sale and Finance Contract are created by an Attorney.
This Purchase Offer will outline the details of the loan (including the downpayment amount, the interest rate, the term of the loan, and other agreed terms and conditions (or contingencies); Plus, default penalties are included for the BUYER and the SELLER should either side violate their pre-determined conditions of the fully signed Purchase Offer or, later... the Promise of Sale Contract.
Q. What Are the Pros and Cons of Owner Financing for BUYERS?
For BUYERS, Owner Financing has the following Advantages:
- Closing a property sale can be quicker with seller financing. Since the loan doesn’t have to go through a number of financial and legal departments that typically would be associated with a lending institution or bank, the BUYER can take possession of their new property faster.
- The overall costs associated with selling the property can be lower. Without having to pay things like bank fees or appraisal costs, the cost to the BUYER is lower than it would be if they went through a third-party. Also, depending on the down payment amount required for the property, the agreed selling price may be more flexible.
- BUYERS have a financing option if the bank turns them down for a home equity loan. If a BUYER is unable to get a loan through a third-party like a bank, Owner Financing provides them with an alternative financing option.
- Disadvantages? Owner Financing through our Agency with the assistance of our trusted legal Attorney’s, eliminates most all concerns or disadvantages:
Q. What happens with the Title in the SELLERS names?
Good Question: Please request the full outline (see below) for more detailed information about the title. The most important document in a legal real estate transaction here.
Q. What are the Pros and Cons of Owner Financing for SELLERS?
For SELLERS, Owner Financing has the following advantages:
- It’s a great opportunity for a gain on investment through interest paid. It’s possible that the SELLER will earn more money from financing the home to a BUYER when calculating the interest made, and lost time sitting as unsold on the market.
- It’s a great opportunity for a gain on investment through rental income achieved, as the Borrowers (BUYERS) would be able to secure all rental income in exchange for the agreement to pay all ongoing cost of ownership (also expressed in the Contracts).
- A great opportunity for supplemental monthly income, which so many of our baby-booming retiree’s or soon-to-be retirees need. In case of death the inheritance laws in the Dominican automatically go to the property owners (SELLERS) heirs. This will, however, also need to be added and addressed in your ESTATE WILL in your country, especially if you have no heirs, or want your assets here in the Dominican Republic to go to another person or persons you name.
- The property owner can sell the home “as is”. The SELLER can possibly avoid having to make costly repairs that they may have been obligated to make if they sell the home in a way other than owner financing. Although our FULL SERVICE AGENCY does provide an inspection and depending on the offer or “as is” condition accepted, we can assist with all repairs, upgrades, renovations, furnishings, etc. We have done this for numerous satisfied buyer clients. Very affordable here.
- The property may sell faster. Because Owner Financing means that more people potentially have access to financing the property, whether it be a villa (house), condo (apartment), land or commercial space or business. Meaning, the property will likely sell faster than it would without the Owner Financing option available.
Disadvantages? Owner Financing through our Agency, and with the assistance of our trusted legal Attorney’s, removes most all concerns or disadvantages:
Whether you are a BUYER or SELLER, Owner Financing is a very viable option to either purchase or sell a property here in the Dominican Republic, and under the sound laws and jurisdictions of the Dominican Republic.
Note: Other countries have little or no jurisdictions as to real estate laws or penalties established here in the Dominican Republic (DR), just like the DR would have little or no jurisdiction to properties purchased by Dominicans in your country, and under your real estate laws and jurisdictions. As an American, I can proudly say Owner Financing works here, and has made many of our other foreign client’s dreams come true, both BUYERS and SELLERS!
Q. How do I know if Attorneys in the DR are Ethical and looking after my (our) Best Interests?
All real estate contracts; Promise of Sale, Finance contracts (if financed) and the final, or Definitive Contracts, must be done by a legal firm or Attorney here (there is no Association of Realtors here… so there are no standardized and legal templates like in the U.S. or Canada). However, not all Attorneys are created equal. Some may not even speak, read or write English, be from the East Coast area, or may may not even specialize in Real Estate law and contracts.
For any other legal questions or concerns, within the FULL Owner Financing OVERVIEW our Agency has included our top 2 Legal Attorneys who have collectively closed countless OWNER FINANCING sales with our Agency (and our clients). Since our very first Owner Financing sale back in 2010 we have had 100% closing success, with legal titles, and ZERO defaults or lawsuits because we select the best and most ethical Attorneys, who understand the law here, and also understand North Americans concerns. We plan to maintain this record, so we are also very careful in selecting the BUYERS and SELLERS we choose to work with, and WHO we refer our busy Attorneys to as well.
Q. Interested in the FULL Owner Financing Overview? Great!
*Remember, this is just a summary. If you are a Prospective Buyer please “Contact Us”. We will ask a few questions, and upon approval, you will be registered with our Agency so we can both feel more confident in our relationship and ongoing communications. We can then provide even deeper advice and insight as to IF Owner Financing is right for you.
If you are a Seller, and your property listing is Exclusive with Reliable Realty SRL, THANK YOU! I can also send this Full Owner Financing Overview to you for your consideration “Contact Us”.
If you have a Non-exclusive property listing with our agency, thank you as well, however, I am sorry, this Agency proprietary Owner Finance information is only available to our Exclusive Sellers.
Regardless, no worries… if one of our Registered Prospective Buyers likes any of our property listings and needs Owner Financing, AND our Non-Exclusive Sellers are open to this, our Agency can discuss Owner Financing with you in more detail at that time.
FOR OUR LIST OF FEATURED PROPERTIES, EITHER PRICED BELOW MARKET VALUE, AND OR PROPERTIES WHERE SELLERS HAVE ALREADY AGREED TO OFFERING OWNER FINANCING, PLEASE CLICK HERE
Thank you for your trust in our FULL SERVICE REAL ESTATE AGENCY!