What is Owner Financing?
So let’s discuss if this is something you are open to.
With this method of financing, the Deed to the property is held in escrow and not recorded until the Seller (Owner) held financing is paid in full. You would have a contract where they are paying you financing (basically, you are the bank) under the conditions that they obtain 3rd party financing (a regular mortgage or pay in full with cash) in a few years. The buyer will enjoy all the benefits of home ownership recognized by IRS, even though the Deed to the property has not been recorded.
This may or may not be an option for a seller for a number of reasons:
- Your current mortgage may not allow it
- It could impact you qualifying for a mortgage on your next property
You may be interested for some of these reasons:
- If it is a strong buyers market (this is more prevalent in down markets like FL and CA; not real common with Austin, TX real estate, at least in my experience)
- If your home is for some reason difficult to sell, this option could reach a segment of the buying market that is otherwise limited
- It could be a better return than your more conventional investments
A few notes:
- Involves a real estate attorney
- The buyer owns the property subject to the terms of the contract
Here are a few online references:
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