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The Understanding of Owner Financing

Let Arizona Luxury Real Estate Let You Get What you Deserve!

Are you a homebuyer having trouble securing financing?

Or feel like you can’t get financed because your financial situation doesn’t fit into neat little boxes? Wouldn’t it be great if you could take out the middle man and find another way to complete the
transaction? Well you can!

How Does Owner Financing Work?

Owner financing is just what it sounds like: instead of the buyer getting a loan from the bank, the person selling the house, the “owner” lends the buyer the money for the purchase.

Here’s what happens

The buyer and seller execute a promissory note providing an interest rate, repayment schedule and consequences of default. The buyer sends the monthly mortgage payments to the seller, who earns interest on the loan, perhaps at a higher rate than available elsewhere.

Owner financing arrangements are often for a short term, such as five years, with a balloon payment due at the end. The idea is that the buyer will be able to refinance before then.

Why Do Owners of the Homes Not Consider Owner Financing?

If you’re an owner of a home and selling, your first objection to this arrangement might be, “But I don’t have the money to lend to a buyer!” Your second objection might be, “I don’t want to become a lender. It’s too risky.” Another reason why owner financing is not that common is that most sellers feel they need the full proceeds from the sale of their home to purchase their next home.

But according Top Real Estate investors, “Many sellers are unaware that with owner financing the note they hold is something that can be sold to someone else. This could happen the same day as closing, so the seller gets cash right away.” In other words, sellers don’t need to have the cash, nor do they have to become lenders.

The other reason owner financing is uncommon is that people aren't familiar with it.

There are actually dozens of other ways to buy:

Lease-option, lease-purchase, land contract, contract for deed, equity sharing, wrap mortgages, and the list goes on and on. Most buyers don’t know how any of these work. We at Arizona Luxury Real Estate have put many clients into homes they never thought they would be able to come close to having.

Why Would a Seller Offer Financing?
  • To minimize carrying costs while waiting to find the perfect buyer and get a deal done quickly
  • To distinguish the property from other listings and get it sold faster
  • To increase the possibility of getting the home’s full asking price
  • To get a down payment to buy another property
  • To ditch the monthly expense associated with owning the house

In other words, owner financing doesn’t just benefit buyer who don’t qualify for (or don’t want) traditional financing. It also benefits sellers, especially hose particularly motivated to unload their homes.

Advantages for Buyers

Seller financing has many advantages for buyers

The closing process can be faster

The deal closes faster, as there is no waiting for the bank loan officer, underwriter and legal department to clear the file.

Closing costs are lower

Buyers love owner financing because they can get in the home for less money. They do not have to pay the bank fees.

The down payment amount can be extremely flexible

Instead of having to meet a bank- or government-mandated minimum, the down payment amount can be whatever the seller and buyer agree to.

If Owner Financing Appeals to you the Homeowner

How do you make it happen?

Add It to the Listing

As a seller, you can offer Owner financing in your listing. Simply adding three words to your listing—”Owner financing available”—will alert potential buyers and their agents of the unique option you’re offering.

Make the Information Available

When potential buyers view your home, leave out an information sheet describing in detail the terms of the Owner financing you are offering.

Because seller financing is uncommon, the buyer and seller would be wise to each consult financial and legal experts who understand how it works before entering into such a transaction. These experts should look out for their clients’ best interests and guide them through the process.

The Bottom Line

There’s more than one way to buy or sell a house.

Just because your financial situation is more complicated than traditional lenders prefer doesn’t mean you can’t buy.

Just because banks aren’t approving borrowers easily doesn’t mean you can’t sell your house. Whichever end of the transaction you’re on, seller financing might be just the solution you’ve been looking for.

Arizona Luxury Real Estate Understands All of the In’s and Out’s of Owner Financing.

Call us at (480) 272-3000 so We can Tell You “the Buyer AND the Seller” how you can benefit from this Unique and Intelligent Option.