ALL >> Real-Estate-and-Foreclosure >> View Article
Real Estate Owner Financing

Owner financing often produces a winning situation for both the homeowner who is selling the property and for the buyer who is purchasing the property. Owner financing may be defined as the situation when a seller is willing to help finance a real estate transaction by creating a loan for the entire purchase if they own the home outright or by creating a loan for part of the purchase price when there is already an existing loan on the property.
There are several benefits to the seller and buyer when an owner financed transaction is used. For one, the transaction may proceed more quickly and easily than when conventional financing is used because there are fewer companies, fewer people, and fewer steps involved. For another, the seller is more apt to receive a higher sales price, and the seller will receive payments and interest over a long period of time. There are tax savings realized by selling under this installment plan. Additionally, the buyer will realize savings by avoiding loan fees and lender charges, and the negotiated interest rate will generally be lower than the available interest rates from a commercial ...
... lender. Also, for the 20% of prospective homebuyers who cannot qualify for a commercial mortgage loan, owner financing is a wonderful way for them to be able to own the home.
There are a few potential disadvantages to owner financing to consider. For one, if the buyer defaults on the loan the seller will have to initiate foreclosure proceedings. This can be costly, time consuming, and require work that the seller might rather avoid. Of course, after the foreclosure the property can be sold again, an advantage for some owners and a disadvantage for other owners. Additionally, the interest income generated by the loan will be subject to taxes, which could be a disadvantage to a seller who is in a higher tax bracket. Also, the seller does not receive cash for their equity immediately, but rather will receive their equity in installment payments over time. This is a disadvantage if the seller has need for a large sum to be used in the near future.
Here are some tips for the seller and the buyer to consider when negotiating an owner financed transaction. The seller should research the buyer's creditworthiness and ask numerous questions to become confident that the buyer can fulfill their obligation. The buyer should provide a written explanation of any problems that appear on their credit report. The buyer should research the local housing market and the condition of the home to become confident that the home is priced fairly and is without major problems. Also, the seller should verify that the new owner is making all insurance and property tax payments. A proof of payment provision should be included in the sales contract. Lastly, the seller should require the buyer to stay ahead on payments, even submitting post dated checks, so that the seller has confidence that foreclosure will not become necessary in the future.
An owner financed home sale can be a winning situation for both seller and buyer. It is important, however, that the seller and the buyer do their due diligence in order to reduce possible risks.
--------------------------------------------------------------------------------------------
Author: Stewart Cole
(You are granted the right to reprint this article but the title and content
must remain unchanged and the authors name and contact information
must be included.)
--------------------------------------------------------------------------------------------
Add Comment
Real Estate and Foreclosure Articles
1. Trueasset ConsultancyAuthor: Anju Trueasset
2. Foreclosure Survival: How Cash Buyers Can Save Your Home Sale
Author: Rick
3. Manufacturing Unit For Rent In Sanand: Everything You Need To Know
Author: Ashishestate
4. Looking For An Industrial Shed For Rent In Sanand? Here’s What To Check
Author: Ashishestate
5. The Role Of Concrete Sand In Road Construction And Infrastructure
Author: doctorsand
6. Sell House As Is – A Quick And Hassle-free Way To Get Cash
Author: Joe Home Buyer Denver Metro
7. Top Reasons To Choose Bizzhub’s Coworking Space In Indiranagar
Author: Bizzhub
8. Top Reasons To Consider Office Space For Rent In Vasant Kunj, Delhi
Author: Hsnrealty
9. Steel Vs. Wood Vs. Aluminum Garage Doors – Which One Is Right For You?
Author: Door-Tech Garage Doors Services
10. Stunning Townhome In The Heart Of Innovation Is Being Sold Privately!
Author: Bruno Versaci
11. Why Businesses Are Turning To Commercial Property Portals In Bangalore For Office Space Solutions
Author: CityInfo Services
12. How A Manufacturing Unit On Lease In Sanand Can Boost Your Business Growth
Author: prakashestate
13. Industrial Shed For Rent In Sanand: How To Find The Perfect Space
Author: prakashestate
14. Key Benefits Of Taking A Manufacturing Unit On Lease In Sanand
Author: Divyaestate
15. Find The Best Industrial Shed For Rent In Sanand – Expert Tips
Author: Divyaestate