Owner financing...what does that mean?

Real Estate Agent with All Mountain Realty

Completely updated unit with hardwood floors thru out, maple cabinets, new appliances! Wonderful 1BR mountain get-away in Big Canoe. Totally remodeled. Enjoy all the amenities available in this resort style community. Take in the soothing waterfall sounds & mountain view from Living Rm. & Balcony. Very Private. Great Rental Unit!! Owner financing available to qualified buyer with 20% down, 10 years at 5%. Owner will pay the 1st year condo fee estimated at $874 with acceptable offer.

 Living area 116 Sconti     Updated kitchen 116 Sconti    Bedroom 116 Scont

The above is my listing in Big Canoe for a small condo that can easily be used as income producing or your own private retreat. Not only is it a terrific deal in Big Canoe but the Seller is offering OWNER FINANCING!  I included the terms in the MLS description to help answer questions if you understand the process. But what if you don't understand the "process"?

Owner Financing  can be very helpful if you are not quite ready to deal with institutional lenders yet. During the downturn, many people lost their friendly relationship with institutional lenders for various reasons. In steps owner financing!

Because the Owners are not as big9 By this I mean: Not having lots of property and tons of money!), they usually ask more from the borrow than most Lenders, to help soften their risk.  Usually it is a larger down payment, sometimes as much as 20%. They often ask a higher interest rate than what a bank might offer, if you were able to use a bank, that is.

And here comes another usually.... Usually the term is for 3-5 years and you pay interest only, not depleting your loan amount at all. After all you did pay 20% of the loan up front, so you really do have substantial skin in the game, so to speak! At the end of the  term, USUALLY, you are able to get a institutional loan and pay off the Owner and probably reduce your monthly payments. You should have the 20%+ equity in the property by then, so, hopefully, you will be doing quite well with the property.

Pros for doing a an Owner Financed transaction:

1. Penalized Buyers are able to purchase property

2. Little if any closing costs (though you should still ALWAYS get Title  insurance any way)

3. Monthly payments are low since you are only paying interest (This is referred to as an ARM, often times)


Cons for doing the same:

1. Hefty down payment

2. Higher interest rate

3. Purchased property could depreciate after you purchase and getting refinanced cold be expensive or not do-able.

4. You stop payment and Owner then forecloses on you ...just like the Big Boys would do!


As you can easily see after comparing the Sellers terms on this Big Canoe condo with my narrative, this is a terrific deal! Financing is for a longer period of time and interest rate is about where rates are today at the banks.  If you are interested in this property or any other property in Big Canoe, please give me a call!


Comments (3)

John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Linda - Thanks for the detailed information on the cons and pros of owner financing.

Nov 02, 2015 07:51 AM
Ralph Gorgoglione
Maui Life Homes / Metro Life Homes - Kihei, HI
Hawaii and California Real Estate (310) 497-9407

Very interesting.  It seems you'd really have to know the market you're in before you entertain doing something like this.

Nov 02, 2015 10:26 PM
Linda Carrig
All Mountain Realty - Big Canoe, GA

It is imperative that you know your market...and hire a REALTOR@ for all your real estate needs!

Nov 03, 2015 04:33 AM