Owner financing has been around since the beginning of time. It’s perturbing to me to see and read articles where people who supposedly are professionals, knowledgeable insiders, etc provide their expert opinions on a subject they apparently do not know a lot about.
This article is going to discuss 3 prevalent myths that circulate in the owner financing arena. The 3 myths are: owner financed homes will carry a higher interest rate, owner financed homes are hard to find, and lastly, only sellers who are in difficult situations choose to owner finance properties.
First Myth Squashed: While it may be true that owner financed homes may carry a higher interest than what a typical lender can offer for a loan, this does not have to be the case, and in all of my experiences, has not been the case. The terms of the loan including, but not limited to, the interest rate, amortization period (if any), balloon payment date, interest only or principal plus interest payments, etc are all completely negotiable between the buyer and the seller. There are typically no rules and both parties are completely free to do what they would like.
Second Myth Squashed: Again, while is may be true that an owner financed home is harder to fine than a home with a real estate sign stuck in the yard, it is not impossible. I can guarantee you that the main reason most people never buy a home owner financed is because they have simply never asked. What we have is ignorant people making ignorant claims to puff their chests and beat on them, yet they have never done it. I will however be the first to tell you that most owner financed homes are not advertised (though many are). Most owner financed deals are hand crafted between two parties.
Third Myth Squashed: The reasoning that only sellers in dire straits, or difficult financial situations choose to owner finance properties is completely incredible. I guarantee there are millions of people in this country who would love to sell their homes and be receiving a steady, consistent 5% monthly interest payment, while watching their principal be solidly protected by a piece of residential real estate. Dozens of millions of stock market investors have witnessed their principal be reduced by 1/3 over the past 12 months. Their interest and dividend payments are far from consistent, and nothing is guaranteed. Just to have the piece of mind of that stead monthly income stream is highly desirable to many people.
In summary, removing the myths that run rampant regarding owner financing is the first step in identifying potential prospects. Once you eliminate the doubts and stop making decisions for people, can you begin to see the unlimited potential of this market.