What is Owner or Seller Financing?
Owner financing available! You may have seen this advertised, but what does it mean? Seller financing also called owner financing, allows a homeowner to still hold ownership of their property while agreeing to terms of a sale AND gain additional profit on your investment.
There is a defined time period or term spelled out on the contract that allows the new homebuyers time to arrange new financing, complete repairs on the home, or even skip traditional mortgage financing with a financial institution and create a mortgage agreement with the owner. The term typically ranges from a two to five year period but the term length is essentially any timeframe the buyer and seller agree to.
Should the unthinkable happen and your buyer defaults, they would have to relinquish their rights to the home. Any equity accumulated over that period would revert back to the original owner, still on title. Sellers can make several creative financing arrangements to suit the needs of the buyers, as well as their own. As with most business deals, it works best when both house buyer and house seller stand to gain from the agreement. It is advisable to seek legal counsel to ensure that the contract protects both yourself and the buyer in the transaction. At Sunrise Home Buyers we use lawyers on all of our purchase and sale agreements.
At Sunrise Home Buyers, we believe the best real estate solutions happen when both parties involved stand to benefit from the sale of your property.
While a property owner may be financing the entire loan for some buyers, others may find they qualify for a conventional mortgage but still fall short of the required downpayment to get into your property. Therefore you may only need to finance a portion of the transaction. To learn more about providing this mutually beneficial opportunity to buyers, we will discuss four key benefits of using owner financing to sell your house.
Getting A Higher, Non-Negotiable Price
One of the primary benefits of using owner financing to sell your house is that you are sure to get a higher asking price than you would be using a traditional sale of your home with a realtor. In any negotiation, if you offer up a benefit to the other party, it stands to reason that you should benefit. By allowing the buyer to avoid a higher down payment and avoiding the need for bank financing, a higher sale price is your reward.
You see, you hold the advantage. The borrowers are willing to pay extra for the opportunity to enjoy the benefits that homeownership brings. If housing prices drop, you benefit from selling at a profit and gain the interest earned during the life of the loan. If housing prices rise, the buyer may achieve an increase in equity when they refinance the property.
Monthly Cash Flow
The monthly payments the house buyer will make towards interest on the purchase loan will add monthly cash flow to your regular income. This is another tremendous benefit of using owner financing to sell your house. And the return on your investment is typically higher than with most fixed-income investments. As the downpayment is negotiable, you’ll receive an extra cash boost when the buyers close. It is even possible for you to negotiate periodic payments to help the buyers meet your demand for the downpayment of up to 20 percent or more over time. The possibilities are endless. And as we stated earlier, as long as both parties will benefit from the transaction, you can both negotiate terms that work for each of you.
A Quicker Closing
Another advantage of using owner financing to sell your house is that you can skip all of the administrative red tape often associated with traditional mortgages. This speedy process means your home will sell and close fast, which is a plus to buyers who are excited to make a move from renting to homeownership right now. Never forget the benefits of speed and convenience when negotiating over any agreement. The ability to close in 30 days or less may even make your home stand out among many others to a buyer with an urgent need or desire to move into their next home.
A Bigger Buyer Pool
By offering seller financing, you open up a whole new market and vastly increase the pool of available purchasers. Having more potential buyers for your property is an excellent incremental benefit of using owner financing to sell your home. As many first-time buyers are entering the market, all too many now find themselves with less than perfect credit.
This status may prevent them from financing a new home through conventional lenders as they are unable to meet the stringent qualifications for loan approval. This underserved sector of potential homebuyers is where you can step in as a home seller and offer a beneficial solution to you and the buyer. While anyone performing owner financing still needs to be cautious of who they enter a contract with, bruised credit should not be viewed as an automatic rejection. Having said that, it’s extremely important to seek professional help and guidance with a legal professional and others well-versed in putting seller financing agreements together. That is why we always use lawyers when buying or selling any home or property. Lawyers, while expensive, are there to perform due diligence and PROTECT BOTH BUYER AND SELLER.
Who Can Help Me With Seller Financing?
Sunrise Home Buyers fully understands the benefits of using owner financing and other creative solutions to help homeowners sell their home. We create agreements on a regular basis either buying or selling a home using seller financing. If you would like to learn more, Sunrise Home Buyers is happy to answer any questions or concerns you may have, with absolutely no obligation. Call Sunrise Home Buyers at (587) 982-7576 or send us a message today!