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These days, even though interest rates are at an all-time historic low and inventory is high – many buyers are in a situation where they cannot easily obtain financing from a traditional lender. But there is a solution that works for these buyers in something called “owner financing”. What this means is that the seller of the home also finances the home, yielding the seller several benefits that they would not be able to enjoy otherwise.
Sell Your Home for As Much As 10% Above Market Value
Since the buyers that have little to no credit, are unable to secure regular financing due to bad credit scores or negative credit history – you will be able to charge a premium on the list price of the home. Not only that, you will be able to go as much as 10 percent above the market value, depending on which market you are selling in. This works especially well during a time when housing values are at their lowest they have been in years and can be a great option for sellers with no choice but to sell for reasons out of their control such as job relocation or change in family dynamics.
Earn As High As 2% More In Interest Than Traditional Lending Rates
With the economy as tough as it has been, investing your cash in the stock market is a hit or miss maneuver. But with owner financing there is a potential for a significant return on your investment. In fact, most people that engage in this type of alternative home selling transaction end up earning 5 to 6 percent on the whole deal just in interest. As an example, consider a home that might have been appraised at $200,000 on the market, sold for 12% higher at $229,000 and then financed with a 5-year balloon at 5%. When you factor in the higher selling price with the added percentage points of interest, the seller ends up with almost $80,000 profit!
High Demand Among Many Buyers Seeking Owner-Financed Situations
Given the plethora of families in distressed situations, there are many previous homeowners that are looking to get into another home but may not be able to because of a short sale situation. Though a short sale does not have as harsh ramifications as foreclosures, the impact on credit lasts at least several years. So during that time of credit rehabilitation, these prospective buyers welcome the chance to grab an owner-financed home. This means that as a seller your property will not last on the market very long – making it a win-win situation for everyone.
Another often-overlooked set of buyers that would be interested in a home being financed by its owners is those people that are self-employed. Lending practices are still very tight for those that do not have at least two years of solid employment on record. Self-employed buyers regularly seek owner-financed properties, another reason that such listings do not last long on the market despite the current buyers’ market.
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Not only is it difficult to get financing for those with less-than-perfect credit but fewer buyers against higher levels of inventory has driven prices down. So at the end of the day, both sides of these transactions have it tough. But with owner financing – it doesn’t have to be that way. To find out more about this alternative form of financing and investment opportunity call your Realtor for a custom consultation to see whether this may be an option for you.
