When most people think of buying a home we all think go to the bank, apply for a loan, and hope that everything lines up, and you get approved to get a loan then purchase a home.
I want to share a story with you that we had happen to a client.
One of our clients was selling their home, and the day of closing the buyers financing fell through. Our hearts dropped….Needless to say that is a complete nightmare, for both buyer and seller, but this happens to alot of people. The crazy part is that the only reason the financing fell through was because the bank said that the buyer’s wife had only been her new job for 8 months and not a year. Not meeting the year plus qualification. I know you’re probably thinking, thats crazy but it gets crazier. The buyer was buying the home for $219,000 and putting $75,000 down. The home was paid off free and clear. So there was no note on the home. The buyer was putting up a great deal of money and was still denied by the bank to to employment length. The investor in me and common sense tells me that they had a great deal of skin in the game to the tune of $75,000. I would be pretty confidant they didn’t want to loose the home, considering they were willing to do owner financing with the sellers. So we asked are sellers if they would be willing to do a short or even long term term owner finance for the buyers and let them refinance down the road. On top of that the buyers even offered to pay a much higher interest rate to the tune of 10%.
So let’s lay it out from the investor point of view and how it would be a win-win for both buyer and seller. The seller could have sold there home to the buyers, gotten $75,000 cash upfront, seller finance the remaining $140,000 for 10-20 or even 30 years or even shorter with a 10% interest rate. There no loan on the property so each payment in the first 5-10 years would be just about all interest payment. The owner is in their 80’s. So it would create a stream of income for the owner while putting 75,000 in their pocket. Plus, if the owner passed away many years later thier haier could still get paid on the property. What would be a sell for 219,000 could have turned into making and extra 20,000+ in finance charges until the buyer refinances. If the buyer doesn’t refinance then the seller makes more money. If the buyer refinances quickly then the seller gets fully paid, if the buyer defaults the seller get $75,000 plus payments and the house back to resell it again. This is a prime senerio of why the traditional route isn’t always the best route. Most Realtors will shy away from this for their clients, we were advocating for our client/seller to do the owner finance and make even more!
MOST RELATORS SHY AWAY FROM OWNER FINANCE IN FEAR OF NOT GETTING COMMISSION, WE ADVOCATE FOR IT IN THE RIGHT SITUATION/DEAL.
This is why we as agents come to the table differently, our view is from not only the clients view but the investor view, asking the question What is best for the client? In this situation we felt that the owner finance was the best deal getting full asking price plus interest payments creating a source of income too! Unfortunately our client/seller didn’t agree and passed on the deal. We do what the client wants but still fell that they had a home run in their lap and really passed it up due to the lack of understanding on owner finance.
When you are selling your home. Owner finance can be a great option for a win-win for everyone involved, Seller, Buyer, and Agents.
