What Is Owner Financing

What Is Owner Financing

Owner financing, occurs when the seller of a home finances all or a portion the sale of his or her own property. This is often referred to in real estate ads as "Owner Will Carry" or similar wording, meaning that the owner of the property will, in effect, act as a bank and loan the purchaser all or part of the money needed to purchase the owner's property.

There can be several advantages to the seller for carrying a note, as it is also known. There can be tax advantages in spreading out the time over which an owner receives the money from the sale of a property. Also, many owners simply like the idea that they can receive a monthly income from a property even after they have sold it - and no longer have to worry about repairing leaky roofs or replacing dead water heaters.

There is a nice monetary inducement to the owner to carry paper as well - the owner can charge the buyer interest on the money that the owner is lending to the buyer. In this way not only does the owner collect a monthly mortgage payment on the property he or she has sold, but the owner collects interest as well, in effect increasing the owner's overall sales price of the property.

In order to protect themselves, some homeowners require that the buyer make their monthly payments into an escrow account held by a bank or other lending institution, and they require the borrower to place a Quit Claim Deed into the escrow account with instructions that if a payment is late by a certain number of days then the escrow officer will automatically file the Quit Claim Deed, restoring the house to the former owner instantly.

If this were to happen the buyer would not only lose title to the property but would also lose any and all payments already made on the property. This is a powerful incentive for the buyer to make all payments in a timely manner.

A more pragmatic reason, perhaps, why some homeowners agree to carry a note is to increase the universe of potential purchasers for their property. The way this works is easy to understand. If the homeowner is making a portion of the loan on the property then the borrower will need to qualify for a smaller loan from a bank or other financial institution, meaning that a larger number of people will be able to qualify for any bank loan that might be required to purchase the property. If the seller finances the entire selling price of the property then buyers do not need to qualify for a bank or other financial institution loan at all. This can greatly increase the number of people who are interested in buying a piece of property.

For starters if the owner is financing all of a sale then a borrower does not have to qualify for a loan at a traditional financial institution. Even if the seller only finances a portion of the loan the borrower benefits by having to qualify for a smaller loan from a traditional mortgage source.

Additionally, when a seller finances a property there are no points or closing costs for the buyer to pay, saving the buyer potentially several thousand dollars on the transaction. And while the seller of the property may charge the same interest rate that a bank or other financial institution would charge, it is sometimes possible for a buyer to actually end up paying a slightly lower interest rate if the seller finances the sale since more aspects of the sale are open to negotiation than may be possible when dealing with a traditional lender.

Many factors can influence whether the seller of a property is willing to carry all or a portion of the sales price on a piece of property. In many cases, however, the determining factor is the overall condition of the market itself.

When homes become difficult to sell - when it is a buyer's market, in other words - then sellers are more inclined to do whatever is necessary to increase their chances of a sales and so owner financing is more readily available.

Conversely, when homes are selling quickly and it is a seller's market, then sellers have little incentive to carry back a mortgage.

So your chances of finding an owner willing to carry back a mortgage are largely dependent on the current housing market. But regardless of prevailing market conditions, it never hurts to ask if an owner is willing to carry paper.


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re: lease option

ekn2god wrote:
Okay This is all really great information. How does one set up a L/O or Rent to Own on our end and sub lease it as a rental property?

Hi Erika

This link to Lease option information my help you. Good luck



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a repost

just fyi for those that may need it


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Owners financing

I came across an owner's financing offer. The condo is 2 bedrooms but is far away from my job. Can I use it as an investement and rent the condo? Thanks

re: condo owner financed

Yes you can but make sure you do the numbers FIRST and that the terms of the agreement work for you as well. Every good deal we find may not be the BBEST deal for us, so use due dilligence.


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NO money down options


Another easy way to acquire property with no money down is with the help of the seller. For example, a seller may decline a down payment in return for higher monthly payments. Or, the seller may pay for the buyer's down payment in order to sell the property faster.


Along with everything else in a real estate contract, the amount of the down payment and who pays it is almost always negotiable. A buyer may elect that the seller pay the down payment, or give credit at closing for the buyer's down payment. A buyer could also request to pay the down payment in installments, whether in monthly installments or as a balloon payment at the end of the year.


Anything you own may be useful as a cash substitute for a no-money-down deal. For example, if the seller is planning to retire, your unused motor home would probably be much more valuable than a cash down payment. Cars, boats, campers, furniture and appliances are all acceptable replacements for a cash down payment.






If you find a seller who needs cash to pay off other debts, you can offer to assume those debts instead of making a down payment.




If you already own property, you could combine mortgages in order to provide the seller with cash at closing without using your own money. You could also suggest that the seller place a second mortgage on top of the first and keep the cash, while you, the buyer, assuming both loans.



Research, Research, Research

There are certain buyers that may be more suitable for accepting no money down offers on a property than others. If a property has been on the market for a long time or is being advertised as a must sell, the seller may be more willing to negotiate. In addition, as with any real estate investment, always research the property before completing a sale.


Napoleon Hill quote

Owner Finance

Okay with Owner Finance...do you ask or nego a specific time frame for the seller/owner to carry the note?

I need some details maybe even some wording on how to ask. I know it maybe on the site but I really have not found this information.


Erika, REI
Brownstone Investment Group

Job 22:21 Submit to God, and you will have peace; then things will go well for you.
Job 22:28 You will succeed in whatever you choose to do, and light will shine on the road ahead of you.
Deut 28:8 The Lord will guarantee a blessing on everything yo do and will fill your storehouses with grain. The Lord you God will bless you in the land he is giving you.

? ? ?

OK if a person where to buy a home . I know for sure you can rent this property while you are paying for it but can you sell it lease option, owner finance, or rent to buy legally while you are paying for it. If you where to put this property on the market to sell its ok so is this the same ?


Thanks for this information. I just came across an individual who may be interested and this helped me out to explain the benefits to them.

Appreciate it!


"The entrepreneur always searches for change, responds to it, and exploits it as an opportunity." — Peter F. Drucker


biker bob wrote:

It depends on what you mean by ok. Yes, it is legal. You will not go to jail.

Most loans nowadays have a due on sale clause. THis gives the bank the right (but NOT the obligation) to call the loan due. Certain actions you mentioned (owner finance, lease option) DO violate the DOS. So the buyer might have to pay the loan off (or possibly assume it depending on what the bank wanted).

finding foreclosures

there are 3 basic ways to find a foreclosure. The best way is to visit the owner at his home, if that does not work then do a mailer and a phone call. Try all 3 and see what works best for you.



Can you elaborate a little

Can you elaborate a little more on how to find foreclosures? Maybe how to do a mailer or how do you do an in-home visit?

"He must increase and I must decrease" John 3:30


my question is i found a few houses in ny that are under $18000; i do not have the cash on hand and i heard that the banks do not offer mortgages for a price so low is this true? and does that mean i would have to ask for owner financing?

What's the best areas to focus on?

I asked this question sully because i'm a beginner and i was wondering is it good if there's an area being redeveloped because the area went down and there rebuilding is it okay to focuse on that area or should i focuse on good areas. I have bad credit and no money what do you suggest i accept all input on this matter.

Thank You
Ms.Anxious To Succeed
Sareena saulter


Sareena's Empire

Can you seller finance if you have no equity in the property?

Hey guys,

I have a question concerning owner financing. I have a condo in south Florida that is losing me about $150 a month. I bought at $136,900 and today it would probably appraise at $80,000 even though there have been closed REOs at $35,000. I get $925 in rent but after HOA fees of $330/month, I'm losing about $150/month. I'd love to sell but realize that I'll just lose tens of thousands of dollars if I do. I would like to seller finance it but here's my question.

I always thought that to seller finance something, you had to own it free and clear. Is this right? One of the investors in my local REI club is offering to seller finance a house. I know he doesn't own it free and clear. How is he doing this?

I have plenty of cash reserves and am in no risk of being late on payments. I just don't want to "own" the condo anymore but there's no way I can sell it traditionally so I was thinking of offering someone a deal like $1000/ down and make payments and you can "own" it. A lease option, I guess you'd call it. However, if I still have to pay the insurance, taxes, etc. I'm not interested in doing a lease option. I don't need the cash out of my condo. I just would like someone else to pay the HOA fees, insurance, taxes, etc. Does anyone have any recommendations?

So going back to my original question concerning owner financing. How does someone offer owner financing and yet allow the buyer to "own" the property if the seller still has a mortgage with the bank?

I hope I being clear enough in my question and appreciate any comments. Let me know if I can clarify further.



Real Estate (Single Family and Multi-unit)

Areas: Fort Lauderdale, Florida

Wish everyone success.

you know alot lol! im

you know alot lol! im learning though!


~ Grace (If Donald Trump can do it YOU BETTER BELIEVE I CAN!!) btw I drew my display pic

Filing the Quit Claim Deed prevents having to foreclose?


Thank you for this great post!

This point of the homeowner requiring that the borrower place a Quit Claim Deed into the escrow account and if payment is late, then the Quit Claim Deed is filed.

This means that the homeowner doesn't have to foreclose on the property to get it back. Is that right?

Thanks again,


Real Estate (Single Family and Multi-unit)

Areas: Fort Lauderdale, Florida

Wish everyone success.

Seller finance if you have no equity?

Wanted to try to streamline my earlier post.

I guess what I'm asking is can a homeowner "seller finance" if he has no equity in the property.

So, basically seller would pay the bank mortgage using the finance payments collected from the buyer?

Like I said, I don't need the cash from the property, I just don't want the cost of ownership and the headache of broken water heaters, etc.



Real Estate (Single Family and Multi-unit)

Areas: Fort Lauderdale, Florida

Wish everyone success.

Locating Investors in Delaware

I am not sure my post are being read or seen. I make a post
and can not find it. And my questions are still not answered.
I need help with this. I also e-mailed Anita and have not received
a response.

For Sully

I noticed you said:

about OWNER FINANCE is: It has absolutley NO effect on your CREDIT, your DEBT to INCOME RATIO will stay the same, in other words, your DEBIT to INCOME will NOT go up.

I would agree with your comment. However,what happens when the term is up on owner financing?? I'll you what happens you have to purchase the home in what ever terms you negotiate with the seller. Once purchased. Now you have to get a loan and it will be on your credit and you debt to income will go up. if you want to do another deal like owner financing that will also affect you debt to ratio from purchasing a property. The only route in my opinion for this type of deal. You would have to have cash and once the term is up you pay off the seller!

Owner Financing help

This was very interesting. Is there a place on this web site I can go to to get more detailed info about getting owners help with finaning? I don't have any money for down payments and I would like to get help from the owner of a apartment building for the downpayment so I can get the banl loan buy it. I really need to get detailed info from how to I present it to the owner and talk him into it to filling out all the paperwork to how the money changes hands to closing the loan with the bank. I need to know how the money changes hands in all this. Does the building owner hand me a check at closing and I give it right back to him in front of the bank? Does the bank care if this is all going on or do we keep it from the bank? I've never got owner financing help before and I'm new to it.

Owner Financing

I started reading about owner financing and I'm not sure if it stayed on that topic or not but here is one. I just got a call today from a realtor and she the owner will hold the paper or do 95% financing on an apartment building I was looking at. I still need to look at the numbers but after I give him the rent deposits and back taxes that would normally come to me at closing it would leave very little for me the put down at that point. It is a 17 unit 1 and 2 bedroom apartment building, brick. It also has a billboard on the property that brings in 11K a year. The figures he gave me i would only have a positive cash flow of a little over 4K a year but I think there are some areas i could bring up the rents. I think as new leases are signed I could get another 10 to 20 each unit a month. I also think his figures for maintance and managment can be improved on. He had over 23K for that. I am not going to get this $630/k apartment building with $0 down but it is going to be very close. He is only charging a 6% rate fpr 25 years which is very good for investment property around here and maybe anywhere. It has $110K of rents each year. I still have to look at the numbers close and visit the property and go inside but I think it will work out. This is just a little bit about owner financing. By the way he decided to do this only after he could not sell it because of the market and i asked him to do it this way.

Anita would you be able to help me? with this info ?

Hi Steve,
All utilities are paid by the tenants. Only the property taxes and sewer are paid by the landlord. The present rents are a total of $1,638.00 per month or $19,656.00 a year. The sewer and water costs are approx. $1,500.00 a year depending on usage. The furnace was replaces in 2007 and there has been approx. $60,000.00 in home improvement since 2007.
The 2 bedroom gets $1,008.00 in rent
The 1 bedroom gets $630.00 in rent
The heat is forced air, the fuel is natural gas.
The taxes are $4,500.00
The sewer is $750.00
The insurance is $500.00
The maintenance is $500.00
The water is $850.00
It is zoned residential but is in a commercial mix use zone

He will hold the mortgage at 8% for 7-10 years with a balloon in the final year. It is not assumable and the amount that he owes he does not want to disclose without an offer.

Let me know. Thankns


Mr. Steven A Murphy

5 Steps to Financing a Sale

An article released this week in Wall Street Journal shares some interesting tips on what to look for or be mindful of in financing a sale of a property. It is a good update in light of credit challenges and ideals hindered by current market conditions.

Selling a home and helping the buyer finance may be a good option to getting a house sold, experts say. Yet it is imperative that the seller thoroughly investigate the buyer’s finances before agreeing to the deal.

Here are some important initial steps to take:
• Investigate the buyer by asking him to fill out a Uniform Residential Loan Application.
• Get bankruptcy details by checking out the case through Public Assess to Court Electronic Records (PACER), a service of the U.S. Judiciary.
• Pull the buyer’s credit report and eviction and criminal history via the American Apartment Owners Association Web site.
• Insist on 20 percent down or offer a contract for deed, which only confers full ownership rights after the home is paid off.
• Consider offering a lease-option with part of the payment going toward the purchase price, which gives the buyer time to repair his credit before seeking conventional financing.
Source: The Wall Street Journal, June Fletcher (08/28/2009)

Tell me more about wrapping the seller's first mortgage

I have have an offer verbally accepted on a rehab. The seller still has a mortgage on the home. She owes 25K. The agreed upon price is 28K. would it be feasible to pay her the 3k in equity straight up as down payment the somehow take over her payments? If so how would that work?

reply - Steve


Let me know. Thankns

Hi First of all this mat be a good deal but it may not be YOUR good deal. Find out the FMV then make your offer at 60 - 70 below that and start there. He wont tell you how much he owes because if he only oes 90K and the place has a fmv of 270K then he figures you will low ball him and he will come out on the loosing end. So use due dilligence and do your homework before putting in any kind of offer


TWITTER - anitarny / FACEBOOK - anitarny


Thanks Anita

I'll wait to hear from you on the best way to move forward and determine the FMV.



Real Estate (Single Family and Multi-unit)

Areas: Fort Lauderdale, Florida

Wish everyone success.

owner will carry

hello, 2/1, 1500 sqft, manufactured home inapark, $23,000, space $450, owner will carry 100%. what can i do with this. don't know if i can sublet, rehab yet. could this be a good deal? just starting out, need to get feet wet but don't want any big issues.


Hi DG Family:

Just a thought; when purchasing a property utilizing owner financing where interest is charged: is it possible to deduct the interest paid when filing our yearly taxes like it is on a bank loan?

Does anyone have an answer.

Any other possibilities?????

Hello my fellow DG followers..
Long story short, a partner and I have recently decided to try to purchase a small business. Using my home equity lone I would have a small amount to put down but my partner has absolutely no money at hand. Given these circumstances we thought owner financing would be our best and possibly only option since most banks would require around 20% down. The owners recently dropped the price from 120K to 99K. After speaking with the seller we found that he was trying to sell it before April in order to buy his dream home he has had his eye on. The good news is he is willing to carry the paper but requires 30% down!!!!! So basically I wanted to reach out to all of you and see if you had any ideas for us. Any way we can present an offer to him that would make him take significantly less up front? I am brand new at the owner financing method so anything would help. I thought we could possibly offer a 1 year contract with an abnormally high interest rate perhaps???? Thank you all in advance!!!


Obtaining Financing

Hi Anita
I'm new here and I need a little help.
I just started as investor by instinct, and right now I have 5 apartments rented and my owm house.
Both under separate loans in my credit.
I have a temporary job, but full time.
The thing is that I want to buy another property (Forclosure) to increase my porfolio, but the bank said that because of my temporary job, the loan could be rejected.
What can I do to get approved and show the bank that I can with another loan.


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