Our realtor pitched us the idea of Owner Financing to sell our home in Arizona. I’m not familiar with this process, so anyone have tips, suggestions, red flags, personal experiences? I’m open to reading what’s on your mind!
Thanks in advance!

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Lol what? If the buyer can’t qualify for bank financing why on earth would you agree to finance them?

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It’s not that uncommon. Lots of investors will do it as well. Especially when interest rates are high there are certainly advantages to the seller if between their downpayment and other funds you are still able to purchase another home

Sounds like a great way for your realtor to make a sale go faster to get paid and a terrible idea for you.

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To clarify, do not do this. You aren’t a bank.

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Nailed it GT 1

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Fire your realtor ASAP. Clearly not in your fiduciary

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Disagree. It’s not absurd at all. It might not be right for OP but historically seller financing has had periods where it has been common.

Two thoughts:

1) You wouldn't get the money for the house right away. Could be an issue if you need it for your next home or to satisfy your mortgage.

2) your only recourse is foreclosure. Can take awhile and can't recover if they damage the property.

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This would only make sense if you don’t need all the money from the sale of your home. Would not recommend unless you’re loaded. Even then it’s probably not worth it.

Imagine if you sold it to them and then never paid the mortgage. Google how long the average foreclosure process is your city. That’s how long it would take you to get your home back.

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What interest rate can you get?

Owner financing was very common back in the 80s when rates were high. But you have to have a lot of equity or own outright to do it. Plus you can’t use that money to buy your next home.

If you own the house with no mortgage you’re good. You have all the leverage. The buyer with pay you a down payment then make consecutive monthly payments to you. If they default you have remedy to take the house back. Get a good lawyer and solid contract. The goal is to have the buyer refi in a year or 2 so you can get a payoff of the remaining balance-then they’re new loan will be with a traditional lender. I did an owner financing deal last year that I am paying on.

I have been investing in real estate for about 6 years, and talking to other investors in my area this was really common before the 80s when interest rates were higher. I would say the advantages are that assuming they make all the payments, you will make more money as they are going to be paying you interest, and typically you can charge an interest rate above current day 30 year mortgage rates. The cons are that it’s going to take a lot longer to get the full value for the house and of course there is a risk they do not pay. I would say it largely depends on what your plans are for the money. If you really need every dollar to purchase your next home or pay off high interest debt it may not make a lot of sense, but if you were just going to invest it and you can get more for selling it on contract it could be worth it.

Ask for a high ltv, high interest rate, predetermined date they have to refi/pay you off by or sell it back to you at a prearranged price. You may do very well for yourself.

You also don't have to offer only a 30 year term. Play with term and see what works best for you with regards to prin paydown and interest earned.

This is a great, creative idea. As a buyer, I'm asking for owner financing as a workaround for high rates. Got 300k in the bank and stable income, but why pay more when you can pay less in interest

https://smallbusiness.chron.com/tax-breaks-owner-financing-22159.html

If you have an existing mortgage, this could trigger a “due on” clause. Make sure you know the fine print. If you don’t have a mortgage, there could be tax benefits in it for you, depending upon your situation. I’ve purchased several properties using owner finance and never had an issue. I usually refi between 1-5 years, depending upon how the deal is structured and whether there is a balloon payment involved. Check out BiggerPockets as I’m sure there are several threads on the topic!

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