From Tom’s point of view, it was an attractive proposition. He liked John and Cynthia, knew Cynthia’s family, and was willing to bet that the young couple would repay a loan on schedule. Tom had another reason for finding the notion of owner financing attractive. In the first few weeks that the house was on the market, it had become clear to him that he would have to lower his asking price considerably in order to sell it. John and Cynthia were not even haggling on the price — they wanted to buy the house for his full asking price, provided that he would finance part of their loan. Tom agreed to finance $175,000 of the loan, repayable over 15 years at an annual percentage rate of six percent.  In real dollars, that meant that Tom would be selling his house for even more than his asking price.

Owner Financing

Benefits the buyer by. . .

• Cutting closing costs

• Obtaining a loan with less scrutiny of credit history and other qualifying factors

• Letting the buyer qualify for a more expensive property

Benefits the seller by. . .

• Generating an ongoing income stream from a property after it is sold.

• Increasing the odds of selling for higher prices.

 

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