Seller Financing in Ocean Hill, Brooklyn: Rowhouses East of Bed-Stuy

Today's bank rate vs. a typical seller-finance rate

When a Ocean Hill owner sells with financing, the owner becomes the lender. Most owners price that loan off what banks charge: homeowners typically ask about 2 percentage points more than the national average 30-year rate, with a 5-year balloon payment, or an extension if both sides agree to one in the contract. The numbers below update every week.

About Ocean Hill

Ocean Hill is a small section of central Brooklyn that sits between Ralph Avenue and Broadway Junction, north of Brownsville and south of Bushwick. Its rowhouse blocks were built mostly in the late 1800s and early 1900s, in the same brownstone, brick and limestone styles found next door in Stuyvesant Heights, though with fewer ornate rows and more plain two-family houses. Because Ocean Hill shares a community district with Brownsville and borders Bed-Stuy, real estate listings often fold it into one or the other, which makes it easy for buyers to overlook.

Broadway, under the elevated J and Z, and Fulton Street, with the C running beneath it, carry most of the shops, along with Rockaway Avenue. Saratoga Park sits on the western side near the Stuyvesant Heights border. The Broadway Junction hub, where the A, C, J, Z and L meet, puts much of the neighborhood within a short walk or bus ride of five subway services and the LIRR East New York station. As Bed-Stuy prices have climbed, buyers looking for a brownstone-style house at a lower price have increasingly crossed Ralph Avenue into Ocean Hill.

Getting around: C at Ralph Av and Rockaway Av on Fulton Street, J and Z along Broadway, and the Broadway Junction hub (A, C, J, Z, L) at the eastern edge

What you will find for sale

• Two- and three-story brick rowhouses from the late 1800s and early 1900s, most configured as two-family homes with an owner's duplex over a rental floor or the reverse.
• Brownstone and limestone rowhouses on the blocks closest to Ralph Avenue and Saratoga Park, similar in style to neighboring Stuyvesant Heights.
• Small walk-ups and corner buildings with stores below and two to six apartments above, lining Broadway under the elevated tracks and parts of Fulton Street.
• Newer infill houses and mid-rise apartment buildings on lots that had stood empty, particularly near Broadway Junction and the eastern edge.

Why seller financing fits Ocean Hill

Ocean Hill sits in an awkward spot for bank appraisals. Its houses look like Bed-Stuy brownstones, but recent sales are fewer and more scattered, so an appraiser may not find enough close comparables to support the agreed price. Many homes need updated electrical, plumbing and heating, and buildings on Broadway can be classified as mixed-use and sent to a commercial loan desk. Buyers who drive for apps, run a barbershop or salon, or work in construction often have income a lender will only partly count, which leaves them short on paper even when they have savings in the bank.

Ocean Hill has many owners who bought well before the area drew wider attention, including older owners who have paid off their houses and heirs managing an estate from out of state. For them, a monthly note payment can be simpler than a sale that hinges on a buyer's bank approval and an appraisal coming in on time. Offering terms can also support a stronger price than an all-cash investor would pay, since the buyer is not capped by a lender's appraisal. Each side should still use its own New York real estate attorney to draft and review the documents.

The 5 terms you will negotiate

Every owner-financed deal comes down to five numbers. Here is what each one means, what is typical in New York City right now, and how they work on an illustrative 2-family brick rowhouse in Ocean Hill.

How to buy owner-to-owner in Ocean Hill

1. Find owners open to financing. Start with Ocean Hill properties on the SellerFinanceNYC live map, where every listing is checked against ACRIS deed and mortgage records. Owners who have held a building for decades with no open mortgage are the most likely to carry a note.
2. Offer on all five terms at once. Price, down payment, rate, amortization and balloon trade off against each other. Put them in a short written term sheet so nothing gets lost.
3. Hire a New York real estate attorney. Your attorney drafts or reviews the contract of sale, the promissory note and the mortgage, and confirms the seller has no existing loan with a due-on-sale clause. See our guide to finding an attorney.
4. Do local due diligence. In Ocean Hill, check:
   • Buildings that face Broadway share the street with the elevated J and Z; look closely at front-wall brick, lintels and windows, and expect train noise to factor into rents.
   • Ocean Hill borders Bed-Stuy's historic districts; check the LPC map for the exact address before planning a new facade, an extra story or a rear addition.
   • Buildings of six or more units from before 1974 usually carry rent-stabilized apartments; ask the seller for each unit's registered rent so your budget uses real figures.
   • Vacant or recently cleared lots near Broadway Junction may have rail or industrial history; a Phase I environmental review protects you if you plan to build.
   • Ask for the HPD complaint history on two-family houses that have been rented for years, including heat, mold and lead paint complaints.
5. Close like a normal sale. The deed transfers to you, you sign the note, and the seller's mortgage is recorded with the City Register. Buy title insurance, and consider a loan servicing company to collect payments and escrow taxes and insurance.
6. Plan the balloon from day one. Use the five years to build a payment record, fix up the building and document income so you can refinance well before the balloon is due.

Questions buyers ask about Ocean Hill