Owner Financing

If you plan to sell a house or other real estate, using owner financing may be unfamiliar to some individuals. If you want to sell property against the current setting of tough lending conditions, it is of importance to know the basics.


Owner financing simply means that the owner assumes the role of a bank and finances the buyer’s purchase. If you opt to do this, you should be aware that this can be difficult to do. You could easily sell the house but this also means that you take a big amount of risk if the buyer defaults on the loan.


Since the United States is dealing with a lot of foreclosures and a poor real estate market, sometimes owner financing can help the buyer and seller close deals that are hard to do when it comes to conventional financing. Also, there are just deals that cannot be done because the credit institutions are just too hard for a buyer to qualify. There are also times that a buyer doesn’t have enough money to make a down payment. Owner financing can help a great lot when it comes to these situations.


This is also beneficial if the seller wants to unload property. Closing a deal for a certain property may take less time compared to traditional financing. The lender will usually scrutinize the collateral property to figure out the level of risk, the seller can do a risk assessment on his property quickly. A good thing about owner financing is that it can also be a good choice for investment. The seller can negotiate the interest rates that appeals to him and you can agree on a rate that is favorable to you.


On the other hand, if the seller structures the loan as an installment sale, he can have a tax benefit. He will have to discuss this with a tax professional. Seller financing can pay for a property either in full or in staggered payments. This is actually similar to a regular mortgage loan, but the seller can have the freedom to set the terms like interest rates or duration of the payment period.