During the recent economic crisis, a familiar question attached to telephone and internet leads from consumers is "Is the seller interested in ow
ner financing?".
ner financing?".There is (I think) a misconception owner financing is plentiful, easy, a slam-dunk for buyers and a great deal for sellers. Not really. Most buyers I've spoken to in response to asking them, "how much shall I tell the seller you are able to put down as a down payment?" answer with a prolonged silence followed by a figure of $2,000 to $10,000. The callers rarely ask about vacant land or cheap fixer-uppers. They usually call about newly listed and modestly priced homes with 3BR/2BA, brand new appliances, newly painted and marketed to be in excellent shape with a price range from $150,000 to $200,000.
Occasionally we hear about a lender with loans for first time homebuyers with 3% down payment BUT the governmentally insured USDA or FHA are there to back up the loan. Sellers doing owner financing do not have that same protection. The few sellers we've had with residential properties and willing to consider owner financing generally want large down payments, far in excess of what lenders ask for and more than most buyers can produce. Our sellers, who could owner finance want the buyer to put down 50%, with a term of 5 or 10 years which makes monthly payments impossible for the buyers.
Buyers beware...some sellers ARE willing and able to take on the risk of owner financing, in fact it is their desire to do so (here's the other secret though...some are hoping the buyer defaults so the seller can sell the house again!).
Buyers never consider that sellers have plans for the income produced by the house sale. Some need to pay off their mortgage, they pay the listing commission which is usually far more than the buyer's suggested down payment and some need the rest of the money for a down payment for on their own new home.
The major thing though that buyers never consider is the seller wants to know why the buyer can't obtain a loan. Sellers are going to pull a credit report just like lenders do. Sellers who might be in a position to owner finance will probably decide that if a lender with all the resources they have aren't willing to risk loaning money to the buyer...the wise seller will not either.
When our sellers aren't considering owner financing, we provide the buyer with blog post I wrote about Our Favorite Lenders in Western North Carolina and suggest they contact them. These loan originators are interested in long term relationship based associations, not just the short term providing of mortgages. They do help buyes obtain mortgages if they are credit-worthy they also are prepared to counsel others who have credit issues to prepare them to buy a house. It is an invaluable service.
Renters get tired of renting and want part of the American dream of owning their own home. We WANT them to have that opportunity...but not by putting our sellers at risk.
So, when you pick up the phone to ask the Realtor "would the seller be willing to owner finance?" just be prepared to hear..."probably not".
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