What Motivates A Seller To Offer Seller Financing?

We all know cash is king and at the end of the day, most sellers would prefer to walk away from the closing table with the cash from the sale in hand without holding a note. However, we know this is not always possible so individual sellers take the next best option, owner financing. But what are the benefits of owner financing other than if you decide you want to “sell my note” eventually, that motivates sellers to offer owner financing?

The largest reason to offer owner financing is it exposes your property to a larger market. People that can’t get financing through traditional means are many times, very good candidates for owner financing. Although some of the people that fall into this category are not creditworthy for various reasons and not worth the risk, others are of acceptable risk and can be considered viable candidates for owner financing. Considering these people as possible buyers can open your marketing efforts up to a whole new segment of potential buyers.

You do however, need to consider the reasons they are unable to obtain a loan through traditional financial institutions. Small down payments or no money available for a down payment may be one of the reasons. These people usually have jobs with an extended history but have for various reasons been unable to save enough money for the necessary down payment. Less than stellar credit history is another reason they have been turned down by traditional financial institutions, especially with the current credit crunch we are now experiencing. A lack of credit history is yet another reason. A recent job change or a change in career with no established record yet or self-employment income which can be a substantial obstacle for obtaining credit.

Some properties do not lend themselves very well to easily obtainable credit for a potential buyer. Houses located in neighborhoods with low property values are always a challenge and owner financing may be the only option. Properties in need of substantial and essential repairs often require creative financing in order to be sold. Properties that have been rental properties or multi-unit properties can be difficult to obtain bank-approved financing. Properties located in mix areas of both residential and business zoning many times are difficult to obtain traditional loans for.

There is the traditional reason sellers may offer owner financing - Investment. The housing market has been slumping for a few years now but this does not negate the fact hat people still need a place to live and call home. Seller financing offers the seller the opportunity profit off his property in slow times as will as hard times. In hard times it may be just a little more difficult to find a suitable buyer and require extra effort, but the choice is simple. Choosing between your property sitting idle and giving you a return on your investment is a strong motivator to get out there and find a suitable buyer rather than loosing money every month and draining your portfolio returns.