What is owner financing??

This first blog post is just a quick ice breaker about basic owner financing. It is directed towards sellers, on how seller financing can be a great win / win solution. I will be posting and blogging more in depth about these ideas and strategies so keep following along.

Let’s start this off super simple – owner financing is where the owner/seller acts as the bank.

 Owner financing is a financial agreement between a home seller and home buyer that replaces a traditional bank mortgage with a direct payment plan between seller and buyer. Owner financing works similarly to a regular bank loan, but the seller finances the home, and the buyer pays the seller back over a period of time according to the loan terms.

“TERMS” where the magic happens.

The agreement terms are where the buyer and seller can work out the win / win solutions. Terms is referring to the details of the purchase.

 Let’s break this into 2 parts.

Loan terms – which will include the details of the “mortgage” 

Purchase price

Down payments

Length of payments

Interest rates

Balloon payments

Amortization schedule

And the other documentation associated with mortgages.

Part 2 – Other purchase terms

This can be practically any thing you want to work out as benefits to the deal. Here are a few examples that I have personally done with owners.

I have taken over management of the property until the closing date several times. This has been a great win / win for several of my past deals. It has freed up the owner from such things like tenant requests, mowing and yard maintenance, and other tasks. For me one of the wins has been being able to screen and place tenants into vacant units and getting everything running smoothly ahead of time.

Another situation that I have worked out with an owner was that they could continue to stay in the home. The owner wanted to sell the house but didn’t want to move right away. We came up with a really great agreement that turned the owner into a tenant. More about this in the next blog post.

Another creative purchase term that worked out great was that the owner knew the property needed a roof. Instead of making this into a deal breaker or looking at it as a problem, I saw it as a great opportunity. I came up with the solution that I would take responsibility to get the new roof on ASAP and that he would pay for the roof. Then we would add the cost of the new roof into the loan agreement. This allowed me to get a new roof on the property and have it done to my standards. While at the same time having the stress of the roof taken off his mind and then me paying for it with interest over the time of our loan agreement.

These are just a few examples of being creative and finding the win/win together. I’ve heard many other stories such as –

Including cars with the sale  

Furniture or other house hold items

Agreements to use vacation properties

Yard work or repair work at the seller’s new house or personal home

Moving help to your new location

This is where you can get super creative and not only get a good deal done but build a great relationship.

There are a lot of benefits available for sellers looking to work with a buyer. The above just scratches the surface of what creative solutions can be done and some of the benefits. Other benefits that we will get into more as we dive in deeper in future post are.

Tax benefits for the seller

Protection from Medicaid and other liabilities

No real estate commissions when selling

The ability to possibly make more money on the sale

Being able to get rid of a problem property that may have challenges if listed with a realtor

Flexible time frames for closing

These are just a few of the benefits that can really save you or make you more money when selling your property.

What Seller Does Owner Financing Work Best For??

Sellers with High Equity.

Some one that owns their property free and clear will be able to use this strategy with the most ease.  But don’t worry if you still have a mortgage or any kind of financing on your house it may still work out just fine. There are still lots of opportunities to do owner financing or other creative deals that will shave many of the similar benefits.  

If you are struggling with the sale of a property because you are in the opposite situation – Low Equity -there are great solutions for that as well. We will be having a full section in the future on the website to help sellers no matter what situation you are in.

I know I didn’t go into great detail or the mechanics of each of these steps but there will be time for that in future posts where I can break down each area. I just wanted to get you thinking outside the box of traditional home sales. There are lots of ways to work together as buyers and sellers.  Give me your feed back on what things you would like to know more about and I’d be happy to target those questions.

If you are a seller and looking to learn more contact me and set up a meeting 800-380-1722 ext. 101

If you are a buyer and are looking for a creative deal also reach out, I might have one of my properties available or someone in my network might have an opportunity ready to get you started.