Wholesale marketplace for vacant land & cheap houses.

International Properties
Unique Development Opportunity in Butler Bay, St. Croix, United States Virgin Islands!

Do you believe that dreams come true? That there is paradise on the Earth? That there is a place where you can escape from cities and just enjoy nature how it i...

International Properties

Unique Development Opportunity in Butler Bay, St. Croix, United States Virgin Islands!

Do you believe that dreams come true? That there is paradise on the Earth? That there is a place where you can escape from cities and just enjoy nature how it is?.

International Properties

Are you Interested in International Real Estate?

Take a look at what you can buy in Honduras and consider investing in a luxury vacation resort home.

International Properties

Retire Today at the "Enclave at The Palms" - one of the world's best place to live & play

Want to retire in Belize? The Enclave at The Palms is our current development of 20 homes, and as of today we have completed the first home and wanted to take the opportunity here...

How Does Owner Financing Work In Real Estate?

Articles

Published on Monday, January 19, 2015 by Land Century

Whether you’re looking to invest in real estate or purchase a new home, there’s a good chance you’ve considered owner financing. Although not as common as a traditional bank mortgage, seller financing is still a viable option for some buyers. Not sure how the process works? We’ll explain how owner financing works in real estate to help you decide if this is the right option for you.

What Is Owner Financing?


Owner financing is exactly as it sounds – instead of a buyer getting a mortgage from a bank, the owner will finance the purchase.

Just like with a traditional loan, a promissory note will be drawn up by the buyer and seller that outlines the repayment schedule, interest rate and the consequences of defaulting on the loan.

In essence, the owner of the property takes the place of a bank. The buyer will send monthly payments to the owner, and the owner will collect interest on the loan. The owner also has the option of selling the loan. In this case, the buyer would then begin sending monthly payments to the investor(s) who purchased the loan.

Seller financing is typically short-term (five years or less). At the end of the loan term, a balloon payment is due. The idea here is not to keep the seller on the hook for duration of a traditional mortgage (15-30 years), but to give the buyer a chance to buy the property now and refinance before the repayment term is up.

Owner and Seller Financing Difference


You may hear the terms “owner financing” or “seller financing” used when talking about this unconventional lending method. Don’t let these terms confuse you. Both refer to the same thing, and can be used interchangeably.

Why Owner Financing in Real Estate is Uncommon


Owner financing is uncommon, but not unheard of in real estate. This unconventional lending method tends to be common if mortgages are hard to come by.

If mortgages aren’t difficult to obtain, but a seller can’t get one, this may be an indication that the buyer isn’t in a financial situation to repay a mortgage. However, if mortgages aren’t easy to come by, even well-qualified buyers may have a hard time securing financing. In this case, sellers may be willing to take an unconventional approach if it means they can sell their property.

Sellers are also more open to unconventional options when credit is tight and selling property becomes a challenge.

But another reason why more sellers aren’t interested in financing the purchase is because they really don’t understand how the process works and they assume they can’t afford to lend the buyer money. In many cases, sellers rely on the proceeds from the sale to buy a new home. Most don’t realize that they can actually sell the loan to an investor for cash – and they can sell the same day as the closing if they want.

What About Owner Financed Land?


When it comes to real estate, owner financing land may be unconventional. But when it comes to land, sellers are more willing to finance a buyer’s purchase. Why? There are many reasons:

- In most cases, the land is strictly an investment. And because it’s undeveloped, the seller probably won’t be using the proceeds to buy a new home to live in. Chances are, they’d be using the proceeds to make another investment.

- In many ways, seller financing is still a form of an investment as the owner will receive interest on the loan.

- Mortgages aren’t always easy to come by when buying land. Sellers understand this, and are more willing to work with buyers to finance their purchase.

Purchasing land by owner financing is undoubtedly much easier to do than purchasing a home by owner financing. In fact, you’ll find hundreds of parcels for sale all over the country that are owner financed.

The Advantages of Seller Financing For Buyers


From a buyer’s standpoint, there are many advantages to seller financing:

- Closing costs may be lower. Because you’re not dealing with the bank, you can avoid having to pay appraisal costs and bank fees. This greatly reduces the closing costs, which means buyers can purchase the property for less.

- The down payment may be lower than the mandated minimum. Because you’re dealing directly with the seller, the down payment can be whatever you and the seller agree to. Note: While there’s a chance the seller may negotiate the down payment, don’t expect them to. Many sellers still expect buyers to put 10% down.

- The closing process is much quicker. There’s no need to wait for the legal department, underwriter and loan officer of the bank to clear a file, so closings can happen quickly with owner financing.

Seller financing allows owners to finance the buyer’s purchase and earn some interest from the loan. Although not common in real estate, owner financing is more readily available when selling land as mortgages are difficult to obtain. This unconventional financing method allows buyers to get into properties quickly, and sellers to minimize carrying costs.
Share this Article
Great development opportunity in The Enclave at The Palms, Northern Belize!

The Enclave at The Palms is a residential subdivision located in the Corozal Province in Northern Belize. This part of the country is very popular with expats, and The Enclave is l...

Featured Listings

10.15 Acres
Blanca, CO
40 Acres
Model, CO
1995 Sq.Ft.
Corning, CA
5 Acres
San Luis, CO
0.26 Acres
Lehigh Acres, FL
0.75 Acres
Lehigh Acres, FL
1 Acre
Willcox, AZ
0.3 Acres
Shelter Cove, CA
0.3 Acres
Shelter Cove, CA
1.68 Acres
Sanders, AZ
1.05 Acres
Concho, AZ
Be Smart, Live Well in North Port, Florida! Great opportunity!

North Port, Florida, is the place you have been waiting for. One of biggest city in Sarasota County, North Port still feels more like a small town and people hope to keep it that w...

120 acres for sale in beautiful Sierra Blanca, TX

Have you ever imagine yourself in the role of Texas cowboy in popular western movie? Where is just you, desert and wild nature? Or you were dreaming of build your own big rancho wi...

Featured Profiles

Verified Wholesaler

Land Century, LLC

Verified Wholesaler

GreenBridge Holdings, LLC

Verified Wholesaler

Harris Investments, LLC

Verified Wholesaler

BuildFortune, LLC

Unique Development Opportunity in Butler Bay, St. Croix, United States Virgin Islands!

Do you believe that dreams come true? That there is paradise on the Earth? That there is a place where you can escape from cities and just enjoy nature how it is?One of this places...

Beautiful Acreage with Farm House for Sale in Corning, CA

This amazing and commodious property is located in Corning, CA, well-known "Olive Capital of the World", can become your own paradise in California. Corning is a well-situated thor...

SHELTER COVE, CALIFORNIA - THE LOST COAST ON PACIFIC OCEAN IN NORTHERN CALIFORNIA

Shelter Cove is a quiet and beautiful beach community in Northern California, with one of the world's very few exclusive black sand beaches. Properties are not far from the ocean...

Are you Interested in International Real Estate?

Calm Waters Resort – Honduras:In beautiful Honduras, the newly launched Calm Waters Resort project is currently under construction, and are offering several of the resort’s vil...

Retire Today at the "Enclave at The Palms" - one of the world's best place to live & play

5 Reasons Why Moving to Belize is Awesome!The Atmosphere. There is something magical about Belize. All your cares and stresses melt away and you enjoy the laid back atmosphere and...

What are Real Estate Investment Trusts and How Do They Work?

When it comes to real estate investments, you'll see a lot of people talking about REITs, or real estate investment trusts. Some people call them "real estate investment stock."The...

Featured Listings

10.15 Acres
Blanca, CO
40 Acres
Model, CO
1995 Sq.Ft.
Corning, CA
5 Acres
San Luis, CO
0.26 Acres
Lehigh Acres, FL
0.75 Acres
Lehigh Acres, FL
1 Acre
Willcox, AZ
0.3 Acres
Shelter Cove, CA
0.3 Acres
Shelter Cove, CA
1.68 Acres
Sanders, AZ
1.05 Acres
Concho, AZ
Business Ideas for Vacant Land - How to Create Income Producing Assets

Vacant land can become an income producing asset. Land is valuable, and while land may be most valuable when a structure is built on it, this doesn't mean it can start producing in...

How Blockchain Could Change the Real Estate Industry

You've heard of cryptocurrencies – unless you've been living under a rock – but you're not sure how they work. Bitcoin, the world's largest cryptocurrency, is run on what's cal...

Featured Profiles

Verified Wholesaler

Land Century, LLC

Verified Wholesaler

GreenBridge Holdings, LLC

Verified Wholesaler

Harris Investments, LLC

Verified Wholesaler

BuildFortune, LLC

What Does the Right of Refusal Mean in Real Estate?

The first right of refusal in real estate is a provision an agreement or lease that gives a potentially interested party the right to buy the property before the seller negotiates...

Avoid Being Scammed on Craigslist and eBay When Buying Property

Just about anything you can imagine can be bought and sold on eBay and Craigslist, from old toasters to vintage record collections, and yes, even property. While these sites have c...

How to Get into Commercial Real Estate Investing & What You Need to Know

When you think of real estate investing, commercial property is usually the first thing that comes to mind. After all, commercial development is where the money is at. As lucrative...

Flipping Houses or Rental Properties - Which Is More Profitable?

You're ready to invest in real estate, but you've hit a brick wall: you don't know whether to rent out your new property, or flip it for a quick profit. Flipping is tempting - it's...

California Areas for Land & Property Investments in Q1 - Q2 2018

Several cities in California topped the list for the hottest real estate markets in 2017. For those looking to invest in land and property in the state, these top cities are your b...