Owner Financing Pros and Cons

OWNER FINANCING PROS & CONS Owner financing is when the seller agrees to sell the property in exchange for a note where the buyer promises to pay back according to the agreed upon terms and pledges the property as collateral for the loan. Since only two parties are involved, the terms are generally more flexible and the closings much quicker than with a conventional loan. ADVANTAGES & DISADVANTAGES TO THE SELLER Advantages: Disadvantages: The disadvantages of this strategy for the seller is that they are not paid the equity up front. This strategy is beneficial to a seller who can afford to wait 5 years for their equity and is looking to looking to earn a monthly positive return on their money (8-12% is better than any bank account). $$$$$ ++++ The end buyer pays all taxes & insurance on the property. There is still a chance that the end buyer may still default on the loan, during which time no income is collected. The seller is able to charge a collect monthly income with less costs, risk, and hassle. If the buyer defaults and left the property in need of repairs, it will be the seller's responsibility to repair, which again, could be expensive. s$$$ ADVANTAGES & DISADVANTAGES TO THE END BUYER Advantages: Disadvantages: Purchasing a property with owner financing in place may be the only way an end buyer is able to achieve the dream of home ownership. If you unable to improve your credit score or refinance for whatever reason within the balloon period, then you will lose the property and as well as the non-refundable down payment you invested. It is ultimately easier to refinance a property that they have been living in and making payments on than it is to obtain new financing The interest rates are higher than conventional loans in order for the owner to offset the risks. C5 Conclusion Owner financing is gaining popularity in todays economy because this strategy offers a larger buyer pool for sellers and give buyers who are otherwise 'un-loanable' in the eyes of the banks. While this strategy has some risks for both parties, overall, owner financing can lead to a mutually beneficial real estate transaction that otherwise would not have occurred. Sources: http://www.reimaverick.com/subject-to/owner-financing-pros-cons/ %24