Right now, unless a buyer has near to perfect credit its tough to obtain a loan with a lender. But as a seller, you have an opportunity to not only sell your home but possibly make more money in the long run on it. Here are 5 reasons why you might consider offering a seller carry back option for buyers.
1. It Reduces Marketing Times
One of the first things real estate agents do when a property is not moving and has been on the market for longer than a month or more reduces the price. Then they can advertise "price reduced" to all agents and on their signs.
Rather than reduce the price, it might be beneficial for the seller to offer to finance. Buyers not only can usually pay the price you are offering but receive many benefits along the way including the money they save by not paying expensive loan fees, origination fees, and points.
2. Increased Inventory of Prospective Purchasers
Almost 40% of Americans are unable to obtain financing right now and by offering this to your buyers, you increase the number of buyers able to buy your home.
While not all of the "unqualified" group would be an acceptable risk for owner financing, it still widens the market of prospective buyers considerably.
3. Reduced Closing Times
Another advantage of offering owner financing is substantially reduced closing times. When a lender is used, there are so many parties involved in the transaction that closing can often take weeks if not a couple months to complete. By offering all the paperwork yourself, it significantly reduces the amount of time needed. Learn more on buying basics here.
4. Investment Strategy for Hard to Finance Properties
Because some properties have issues when it comes to financing through a typical bank or lender, owner financing comes in handy in these cases. These might include mixed use property, land, mobile and land, non-conforming, low value, and others.
5. Income from the Interest
Why do you think banks have so much money? If the seller offers the financing, they also obtain all the interest on the property -earning income even after they sell by offering owner financing. For example, a $100,000 mortgage at 9 percent with monthly payments of $804.62 will pay back $289,663.20 over 30 years. That additional $189,663.20 (over the $100,000 mortgage) is the power of interest income!
If you are thinking about offering owner financing give us a call and we can help work through the numbers with you to determine if its a smart idea for your situation. It might also be a good idea to speak with a real estate lawyer to be sure all the documents are drawn up properly.