If you’re trying to invest in real estate, it’s sometimes best to put yourself in the shoes of a seller to better understand their objections to creative financing.
Most sellers aren’t hoping you’ll go be indebted to a bank when you’re buying from them; they usually just hesitate on creative financing because you’re not understanding what they are hoping to get out of the deal. So, this is an exercise that can help you to understand what your sellers need and want from their property.
Pretend you’re a seller, considering owner financing
So, you're thinking about selling your house, and you've come across the option of owner financing. It might sound like a good deal at first, but there are a few objections you might have to consider before diving in.
One common concern with owner financing is the lack of protection for the seller.
Traditional mortgages have a number of consumer protections in place, such as the ability to refinance and the option to sell the property if you can't make the payments. With owner financing, these protections aren't always available unless they're negotiated with the buyer in the contract before closing.
Another objection is thinking about what’s fair for your home.
Part of the reason people go to the bank for a mortgage is because sellers don’t want to run credit checks, determine what’s a fair cost of a house and then assume they have to charge the same interest rate that banks charge and keep track of this over time all themselves.
This seems like a lot of work to be done just to sell your property.
So, how do you overcome these objections and decide if owner financing is the right way to sell for you? Make sure you understand the terms of your mortgage.
Clearly define the interest rate, payment schedule, and any other terms in the contract. Make sure you as the seller and the buyer understand everything the same way and are in agreement. Then take everything to a lawyer or a title company the way your would with a traditional mortgage.
This makes sure that everything is kosher, legal and beneficial to both parties.
If negotiations are done correctly, you can sell your home for more money than the asking price, with little to no interest charged to your buyer, make more money and a steady flow of it over time, and sell your property all in one swoop.
Doing seller financing opens you up to a whole new crowd of buyers.
If you are self-employed and have a harder time getting approved for a traditional mortgage, owner financing is a good option.
Banks don’t like entrepreneurs, which is a problem for the 9.6 million people who are self employed.
Instead of people being interested in your house that have a stable income but doesn't qualify by the bank's rules, everyone who’s willing to meet your price is now a candidate to buy your home.
Just remember: seller financing works well when you fully understand the terms of the mortgage.
You can make a lot more money in the long run and sell your house faster if you give creative financing a shot.