Seller Benefits of Owner Financing

1. Getting the house sold. The most obvious benefit, and the one which most sellers are looking for is the ability to sell their house in a down market. There is no question the requirements to qualify for a conventional loan prevent some people from buying. In some cases, an otherwise acceptable buyer has some irrelevant “baggage” which prevents loan qualification. An owner financed sale to someone like this may make a sale possible which would otherwise not happen.

2. Getting a better price. Buyers sometimes have trouble coming up with the downpayment and closing costs needed to buy a home. They may have good jobs, make lots of money, make their payments on time, but never be able to save anything. They may be perfectly happy to pay more for a house which requires a smaller down payment.

3. Creating an income. Banks make money by borrowing cheap and lending high. They may pay 2-3% to you on your savings but charge 6-7% for loans. The difference “spread” is how they pay for those fancy buildings. When a seller provides their own financing they have the opportunity to take the profits the bank would have made and put it in their own pocket. If the seller has savings which are earning at a smaller rate than the buyer is willing to pay for an owner financed loan, the seller may be able to double or triple the return on their money. This can make a significant difference with the kind of money involved in the typical house purchase.