In the "glory days" a seller would give a buyer a second mortgage of a few thousand and no one thought about it much here in our Trustee state of California. Then, equity vanished and so did owner's second mortgages when the house went into foreclosure.
All of a sudden I've had several requests for owner financing. Usually these are rental properties where the owners do not have loans on the property. With owner financing, this would put my seller in FIRST position.
But is this a good deal for my seller? Here are things to consider:
1. First and foremost, ask the question "why is the buyer not able to get a loan?" This should stop many of these transactions right there and then. Bad credit? Not enough down payment? Short work history?
2. Second, the seller should do a little soul searching on whether or not to sign over a property to someone who might not keep up with the maintenance of the property. It sounds good to be in FIRST position, but it takes a long time to actually get the property back in a foreclosure and the erstwhile buyer can do a lot of damage during that time.
3. Third, rentals are in great demand at this time in our economy; why give up good income for possible headaches in the future?
4. Fourth, the low interest rate. Would a buyer pay a much higher interest rate, say 7%+ to make up the shortfall for your rental income? You are used to getting X amount of money rent, but now you only get -X? Is it worth the risk?
However, there are properties in the Del Norte County area that are just not financeable:
1. Old with too much work that needs to be done.
2. Work that has been done without permits over the years.
3. The seller is waiting for a buyer to make a cash offer, but the offer would be extremely low. In essence, the seller takes a chance just to get the higher price.
If you are in this position, buyer or seller, give me a call.