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GET THE FACTS ABOUT OWNER FINANCING

By
Real Estate Broker/Owner with Realty One Group

 

A very effective method of selling real estate in a buyer's market is to consider offering owner financing, which can offer both the buyer and seller many benefits in the selling and financing of real estate.

 Unlike many seller's who may end up giving a deep discount to sell their property outright, owner financing will likely allow the seller to sell their property at a fair price, plus could provide additional income in the form of monthly payments that could either help pay the debt service on their property or go right to the bottom line, potentially adding more dollars to the sales price over time.  The buyer's benefit by securing a property that can help them establish or re-establish credit that over a period of time can help them secure a low interest mortgage loan and receive potential tax benefits as well.

Unfortunately, very few property sellers consider offering owner financing simply because of the complexities involved, which include what types of financing to offer, how to qualify potential home buyers, what documentation to ask for, and so on.  There are many financial and real estate professionals who offer their services to help sellers get all of the information and documentation necessary to successfully secure owner financing for themselves and their buyers.

There are several types of owner financing currently available, and depending on the seller's current circumstances will determine what type of owner financing they can offer to a potential buyer.  The most common types of owner financing available include a Land Contract, Agreement for Deed, Contract for Deed, Lease with Option to Purchase, and a regular promissory note secured by a mortgage. 

If a property seller owns their property free and clear, meaning no mortgages are currently secured by the property, the seller can choose any of the financing options listed above.  If however, the property seller currently has a mortgage on their property, they are limited to offering all of the financing options listed except for the note and mortgage loan, unless of course the seller can pay off their mortgage and replace it with a seller held note and mortgage.  These other financing options could be considered a wrap around mortgage, which encompasses the seller's existing mortgage with the additional loan amount which is based on the sales price and the down payment.

Before a seller and/or buyer considers getting involved with an owner financing arrangement, several steps must be taken and full disclosure from both parties must be acknowledged to fully understand each parties responsibilities to the real estate transaction.  The buyer needs to be fully aware that the seller is in a position to offer owner financing, and is not experiencing any financial difficulties with their own mortgage.  As for the seller, they need to know that the buyer will be in a position to get their own mortgage in the near future, and eventually purchase the home outright.  Depending on the buyer's circumstances regarding their income and/or credit, the exact term of the owner financing must coincide within the timetable necessary for the buyer to complete the sales transaction.

Therefore, it is highly recommended that both buyer and seller seek professional advice to make sure that any type of owner financing that is considered will work for both buyer and seller.  This advice can be very inexpensive to both buyer and seller, and can save a lot of headaches later.

Owner financing is a tremendous tool for sellers to help them sell their home quickly and at a better price and could potentially add income benefits as well.  

For free information on the benefits of owner financing for both the buyer and seller, please call 941-206-6000.

   Mike Sikorski, GRI

Licensed Real Estate Broker

Licensed Mortgage Broker

Loss Mitigation Specialist

Florida Realty Network LLC

22079 Kimble Avenue

Port Charlotte, Florida 33952

Phone 941-206-6000

Email Mike@FloridaRealty.ne

Web site www.FloridaRealty.net

MeLisa Minter, Realtor
Minter Real Estate Services - Taylor Lake Village, TX
Bay Area Houston Real Estate Agent

Hi Mike,

I have a property that has been on the market a while and I am considering presenting the Owner Financing Option to the seller. My question is, "how do we as realtors" collect commissions from these types of transactions?  Is is set up similarly to a lease, where the first month's rent basically goes to cover realtor fees?

Let me know.

MeLisa Minter

www.homesmint2be.com

Sep 28, 2008 04:01 PM