Owner Financing - How it Works, Why it Works

I was recently working with a seller who owned his home outright, no mortgage.  When we first met, I suggested that Owner Financing might be a good option to offer but he wanted to try a traditional sale first. 

After a couple of months with few showings, we re-visited the idea and on a Friday morning I changed the Financing options available.  By Friday evening the house was being shown by an agent who had a client who needed Owner Financing.  Saturday afternoon I showed the home to a prospective buyer.  And Sunday morning, another agent showed the home.  By Monday morning, I had multiple offers to present to my client.

In an Owner Financing sale, the seller has a lot of leverage.  First of all the list price is not negotiable assuming its pretty close to Fair Market Value.  The terms of the loan (interest, length of note, length of amortization) are set by the seller but negotiable.  Title costs can be structured to be paid equally by both the seller and the buyer.  A good sized down payment is required (usually a minimum of 10% but can be more) which means a substantial commitment by the buyer.

Benefits for the buyer are that they are able to buy a home while they work on their credit in order to refinance down the line.  Or if the buyer is self-employed, they can qualify with their tax return and credit report.  The closing costs are lower and closing and possession are quicker. They should also receive a 1099 from the seller for their taxes.

Owner Financing can be a win/win.