I'm selling homes in this market with Owner Financing and Private Lending!
If you are an owner and own your home free and clear, you should consider owner financing in this market. With Owner Financing, you close the purchase of your home just like any other real estate sale. The only difference is that you are the bank. The title company or attorney will set up your mortgage/note and you will negotiate the terms you desire with the buyer.
Here are two recent examples I have had. One owner was looking for consistent income over a period of time. Therefore, he sold his home with a 10% down payment, we verified the buyer's occupation and income, pulled credit (yes, there were credit issues which we have the explanation and the owner was satisfied), and decided on the terms of the loan. The owner did a 20 year fixed rate fully amortized loan at 6.5% with no pre-payment penalty. The buyer is responsible to pay taxes and their own insurance, remember they own the home!
Buyers have the option of obtaining private financing too! Generally, private financing will research the home for market value and want a minimum of 40% down with interest rates ranging from 9-12%.
In the event the buyer of the home defaults, well the "bank" (previous owner) will have to begin foreclosure proceedings, and yes, this will cost money. In the end, however, the owner has the original deposit and possibly the property (asset) to re-sell.
In the event of the balloon, if the buyer can not pay off the loan at the end of the term, the private lender or owner would then refinance the buyer and, of course, renegotiate the terms.
I think this is a great alternative for owner's that are in a position to do this. Where, in this market, can one make this kind of return?