Owner Financing - 3 Benefits & Is It Right For You? | Tampa Real Estate / KRL Group FL, LLC

When you need to sell your house fast, people often look for signs that say “We buy houses fast for cash!” or ads that scream “Cash 4 houses”, but is this always the best option? There are many situations, where there may be better options. You may find the term owner financing to be a bit intimidating, and that’s OK. Here, we will discuss the basics of what it is, and how it can benefit you as the seller.

What is Owner Financing?

Owner financing, aka “seller financing”, “holding the note”, or “buying on terms”, is when you, as the seller, carry all or part of the purchase price of the property. Instead of the buyer getting a new loan with a bank or mortgage company, you and the buyer would agree on the sales price, a down payment, interest rate, etc. You are still selling the house, but you have the ability to set the terms (as long or short as your like) based on your situation. Then, the buyer makes payments to you each month based on the sales terms. You may wonder, “Why would I want to offer owner financing when I could just sell the house for cash?“

Benefits of Owner Financing

Higher Sales Price – You will almost always get a higher price for your house compared to an all cash offer. By spreading out the payments over an agreed upon period of time, the buyer is able to be more flexible on their purchase price.
Better Interest On Your Money – How much do banks pay for interest these days? Interest rates are dreadfully low if you are trying to save money. What will you do if someone pays all cash for your house? Will you have that money in the bank earning just 0.7% interest? If you sell the house with owner financing, you can set the terms and interest rate that work for you, and they will allow you to earn a higher return than you would get with your money sitting in the bank.
Monthly Income / Tax Benefits – People that get lump sum payments, often spend the money unwisely, and look back to wonder where the money went-just look at the stories of so many lottery winners. Owner financing offers monthly payments that will increase your monthly income, allowing you to enjoy this income over a longer period of time. Also, since you are being paid over a period of time, the amount of tax that you pay is usually less than if you get paid a lump sum for your house. You should always review your specific tax situation with a CPA to make sure that you make the right decision for you and your family, but in many cases, owner financing will help minimize your tax burden.

Can anyone offer owner financing?

Owner financing works best if your house does not have an existing mortgage or if it has high equity. A common example would be an inherited house or a house that you have owned for a long time and not refinanced recently.

What happens if the buyer stops paying? How am I protected?

These are great questions! With owner financing, you are the mortgage holder, which should be recorded with your county records. This is not difficult and can be handled by the title company that oversees the closing. As the mortgage holder, if the buyer stops making their payments, you can foreclose on the buyer. You will have gotten the property back, which you can then sell again, and made some interest along the way.

We hope that this answers some of your questions, and helps you consider all of your options when selling your house. If you have additional questions, you can call or email us, or simply comment below!

Greg & Eneida
KRL Group FL, LLC