Home Buying in San Antonio>Question Details

Vickeybutler, Home Buyer in San Antonio, TX

what does "seller will consider owner financing"? Is this a good thing?

Asked by Vickeybutler, San Antonio, TX Thu Nov 3, 2011

Help the community by answering this question:


The seller is offering to carry the note on the home, or in essence, become the lender that you will make your mortgage payments to. This is a creative financing option. It can be a "good thing" if your are a well qualified buyer that has something in your credit or financing past that is preventing you from getting the loan you want. You will have the opportunity to negotiate the terms and make a direct case for why you are a solid borrower. Most likely the seller owns the home out right and is looking for a cash flow opportunity. Be sure to find out if the seller has experience in doing this sort of financing and if not have they employed someone who has. You should also think about taking the loan agreement to a lawyer for review.
1 vote Thank Flag Link Thu Nov 3, 2011
It can be a very good thing, or it could be the worst financial nightmare of your life.

What happens if the seller goes belly up or doesn’t pay any underlying mortgage? Lots of info on a similar subject on my blog, see the link below.
2 votes Thank Flag Link Fri Nov 4, 2011
No.... It is rare that any seller can really offer owner financing. Most of the time that I see they have no clue.

Occasionally there are legitimate deals out there, but if you get owner financing, make sure you hire your own attorney and you pick the title company. Make sure YOUR attorney reviews any contracts BEFORE you sign. People will tell you all kind of reasons you don't need to do this, and when you start hearing that, it is the time to back off. It's a huge investment, maybe the biggest one you will ever make, so why not spend $300 to get an attorney to review everything.

Good luck.
1 vote Thank Flag Link Fri Nov 4, 2011
Bruce Lynn, Real Estate Pro in Coppell, TX
It is a good thing if you don't qualifty for a mortgage. Buuuuuuttttttt... I would take a good look at the home as there is usually a REASON why a seller would be willing to carry the note... It's not really a good or bad thing... just depends on if you like the home or not..

Web Reference: http://www.SAHomeExpert.com
1 vote Thank Flag Link Thu Nov 3, 2011
Not really... if you are not in need of owner financing it probably means the owner owes more than the home is worth so they cannot sell it without writing a check or performing a short sale. Owner financing is very tricky and you need to make sure you protect yourself. If you are considering this type of financing because your credit is in need of repair it may make sense to sit down with a mortgage professional who will take the time to help you get your credit moving in the right direction. While owner financing has its merits under certain circumstances it is something you need to go into with your eyes open. Make sure you understand the process thoroughly or you can get burned and lose a lot of money.

Best of luck to you.

Don Groff
REALTOR® | Mortgage Broker
Keller Williams Realty | 360 Lending Group
o.512.669.5599 m.512.633.4157
0 votes Thank Flag Link Fri Nov 4, 2011
Owner financing typical turns into a nightmare for the tenant/buyer in these types of circumstance.

Recommend to obtain your own financing purchase any property

Lynn911 Dallas Realtor & Consultant, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
0 votes Thank Flag Link Fri Nov 4, 2011
Hi Vickey,
We are starting to see a few of these now, with financing guidelines becoming more stringent. It does carry some inherent risk though.

In today's market, there is an abundance of homes for sale, and the competition is tight. Buyer's that could have gotten a loan just a year or so ago are finding that it's a little tougher now, and are looking for alternatives.

Enter the Seller Financed Home.

These sellers are willing to take on the risk of financing the home to get it sold so they can move on, but not all sellers can do this. Many of the loans on homes have a "Due on Sale" clause. Which simply put, when you sell it, you have to pay off the note immediately. And unless they own it outright, is hard to do.

The risk for the buyer, is that the home has a note on it through the seller already, you are making payments to the seller, but the seller does not make the payments to the bank. It doesn't matter who is right or not when the constable is knocking at the door with foreclosure notices.

Be very careful, and make sure you have someone who understands the risks helping you along, i.e. an attorney. Just because an attorney is involved already DOES NOT mean they REPRESENT YOU.

It can be a good way for many to sell and to buy. Just be careful and have your eyes open prior to signing anything. An attorney may not cost as much as many people think, especially when your home is on the line.

Good luck.
0 votes Thank Flag Link Fri Nov 4, 2011
It can't hurt... it means the seller will consider providing the financing. They are no obligated to do so, but it may be an option if you cannot receive conventional financing ( whose terms may be more favorable )
0 votes Thank Flag Link Fri Nov 4, 2011

Owner financing is offered as an option to buyer's who aren't credit worthy for bank financing. The terms almost always favor the seller and rightfully so because the buyer who isn't credit worthy is more of a risk. As a buyer you would want to meet with a lender to find out if you can qualify for bank financing first as the rates are still low. I work with some great loan officers if you need a referral. I would also recommend a first time home buyer's class. Call me for information.

Jana Halverson
0 votes Thank Flag Link Fri Nov 4, 2011
You will be seeing more creative means of financing like this in the future, as there are so many people with good income that damaged their credit with short sales or foreclosures that were due to the drop in value of their homes, not a drop in their income. If your credit isn't perfect, owner financing can be an opportunity to get in the housing market without waiting to improve your credit. But you need to realize that you are going to pay higher interest and that is why you need to have a plan to refinance in a few years into a better deal. Hopefully, even higher interest, mixed with lower prices now, will still have you realize a gain by the time your refi. Most owner financing deals are a maximum of 5 yr. term. Best, Terry Bell, Realtor, Santa Rosa, CA
(Your thumbs up is always appreciated!)
0 votes Thank Flag Link Thu Nov 3, 2011
From my perspective as an investor, owner financing is a great thing (whether I'm buying/selling). As a buyer, I like it whenever a seller offers some seller financing, because that shows me he/she is willing to stand by the value of the property. Stated another way, he/she isn't just dumping the property on me. As a seller, I have more control over the transaction, and I'll make a higher return on my money than if I were to cash out.
0 votes Thank Flag Link Thu Nov 3, 2011
Like the other agents explained, it can be good or bad. Sounds like you don't have an agent to represent you and be there for questions like this. Give me a call or shoot me an email if you have any more home buying questions.

Talk to you soon!
Becky Aranibar
0 votes Thank Flag Link Thu Nov 3, 2011
Sometimes Seller are willing to "act like the bank" and finance the property for you, so you don't have to go through a bank. In some cases, this is a good thing. Sellers sometimes keep their assets tied up into real estate for two reasons, they are guaranteed a return on their investment (the interest) and if you default of the loan, they have a chance to take the property back. Its is the same thing as a foreclosure. Some investment workshops teach this as a great investment practice...I don't know if I would call it a great practice, but it is not a bad thing.
So, just consider the house. If it is really worth it, and the loan package the seller is offering is reasonable, it might be a good idea.
0 votes Thank Flag Link Thu Nov 3, 2011
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