Welcome to Owner-Financing.com
Owner financing is a great tool, which, when used properly, offers benefits to both buyer and seller. Like all tools it can also cause damage to buyers and sellers. The purpose of this website is to provide an introduction to the risks and rewards of seller financing plus some ideas for creative ways to make it successful for both parties.
When home sales slow down seller financing as a sales tool always becomes more popular. Problems occur when desperate sellers, driven by the need to sell immediately, get talked into providing owner financing without really understanding the risks or the process. They frequently bypasses some of the steps in the normal home sales process, especially those which protect the seller. When problems arise, and they ALWAYS do, naive sellers don’t know what to do and may not have the paperwork needed to protect their position.
I know people who can hardly wait for the downturn to really take hold because they know the boom in owner financing will create opportunities for them to profit. You do NOT want to find yourself unprepared for dealing with them! If you educate yourself about owner financing before you negotiate the deal and create the documents, you will be in a position of strength. Use the links at the left to inform yourself about owner financing, but keep in mind whole books are written about seller financing and lawyers sometimes make a career out of specializing in this area. When real money is on the table, professional advice should always be obtained.
Seller financing doesn’t have to be a win/loose situation. Your hourly pay rate for taking the time to educate yourself about owner financing ahead of time will be very high.
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If your condo has an existing mortgage it almost certainly has a “Due on Sale” clause in it that says if you sell the property the entire outstanding balance is due and payable. This is commonly ignored, but doing so leaves you at risk of getting an ugly note from the lender that says you have to pay them off immediately.
You also need to look at your condo association rules. Many place restrictions on sales that may limit your choices.
If you decide to offer owner financing you will want an experienced real estate attorney drafting the documents and making the arrangements. You want someone who has been doing this on a regular basis for several years.
With owner financing you effectively become the bank. That means if the buyer doesn’t pay you are the one who will have to start the foreclosure process, etc. If all the paperwork is in order there is a specific legal process for doing this. There are laws about how the defaulting party must be notified, the time they have to respond, etc. In your case I am sure you would want to have this done by an attorney.
Even if you do everything right there is no certainty things will go smoothly for the life of the loan. We live in times when good people may suffer a job loss and be unable to honor their commitments no matter how much they may want to. If the idea of having to deal with these issues is uncomfortable I would suggest you lower the price until you can find a cash buyer.
While I believe that owner financing can be a wonderful tool in the right circumstances I also “get” to read some sad stories from people whose sale went sour and left them in serious financial and emotional distress. If you are the kind of person who can deal with this kind of uncertainty and you are not counting on the payment to cover your own food/shelter expenses go for it. However, it doesn’t take long for attorney fees and emotional trauma to add up to a lot of money and make you wish you had gone for a lower cash sale price.
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