How Owner Financing with a Professional Home Buyer Works

Want to sell your home fast for a sizable amount?

You probably know that professional home buyers can buy your home for cash, but what you probably don’t know is that some can offer owner financing, also referred to as seller financing, which can come with a lot of benefits.

What the heck is owner financing, you ask?

Good question.

Here’s how owner financing with a professional home buyer works:

When a professional home buyer buys a property for cash it’s at around 75-80% ARV (after repair value), but with owner financing, they can buy the property all the way up to 100% ARV.

In owner financing, the seller lends the professional home buyer the money for the purchase. The seller doesn’t need to have cash or have their house paid off entirely to do this.

The arrangement is often for a short term – typically five years – with a balloon payment due at the end. The idea is that the professional home buyer will refinance before then.

Once the professional home buyer and seller agree on terms, they will both sign a promissory note, which contains the terms of the loan, including a repayment schedule, an interest rate, and consequences of default. Then they will record a mortgage with the local public records authority. Once that’s done, the buyer will send monthly payments on the loan.

The seller can sell the promissory note to someone else at any time.

Benefits for the Seller

  • The seller will typically earn interest on the loan at a higher rate than they could get elsewhere, which increases the possibility of getting more money for their home.
  • It allows for a quick sale.
  • Can typically get more money for a house as-is.

Benefits for the Professional Home Buyer

  • Less rigid qualifying and down payment requirements.
  • More flexible terms.
  • It allows for them to buy the home quicker.

Reducing Risks

Like most real estate transactions, there can be some risks with owner financing, so it is a good idea to consult a tax expert and attorney.

You’ll also want to be sure to choose a professional home buyer with extensive experience and a great track record using owner financing. They should have an established team of professionals they work with who specialize in these types of transactions.

Have more questions about owner financing? Give us a call at (832) 802 – 4575 or fill out the form below. We’re happy to help!

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