Privately held mortgages are a sensible way to sell property and are extremely common all over the United States. (It has been estimated that approximately 10% to 20% of property sold is now sold with Seller financing.) In some states they are called a Note and Mortgage, Bond and Mortgage, Trust Deed, Deed of Trust, Contract for Deed, or Land Contract. They all represent the same thing however: a way of selling property where the Purchaser “borrows” from the Seller rather than paying all cash or borrowing from a bank. If you are selling property here are a few good reasons to consider using owner financing:

Advantages For The Seller

  1. The number of potential buyers for the property will increase significantly.
  2. The chances of selling the property quickly will increase because there are now more potential buyers for it.
  3. The sale price received for the property will not have to be reduced below market value because the Seller is financing the Purchaser.
  4. Once a buyer is found, the sale will close much quicker.
  5. The Seller may be able to defer any income tax liability due on the sale.
  6. The newly created mortgage can be sold for cash at any time.
  7. By selling the property more quickly, the Seller will save the expenses of maintaining the property until it is eventually sold. These savings would include:
        • The property taxes.
        • The homeowner's insurance.
        • The maintenance expenses.
        • The heating and utility expenses.
        • The interest portion of any mortgage payments being made on the property.
        • The opportunity cost of not having the money the Seller would receive from the sale of the property at work for them earning interest. While this money remains invested in the property, the Seller does not earn interest on it.

Advantages For The Purchaser

  1. The Purchaser will have an opportunity to buy a property that they may not qualify for, if they are required to rely on conventional bank financing.
  2. The Purchaser will pay much lower closing costs with owner financing than they would with conventional bank financing. *
  3. The Purchaser may be allowed to make a smaller down payment than many banks would require.
  4. The Purchaser could make a smaller down payment without having to incur the additional expense of Mortgage Guaranty Insurance premiums.
  5. The Purchaser may be given the option of creating flexible payment terms.
  6. The Purchaser will not have to pay origination points with owner financing. *
  7. The Purchaser will not have to meet rigid bank qualifying standards.
  8. The Purchaser may not have to establish a prepaid escrow account for taxes and insurance. *
* This will give the Purchaser additional money to invest in their down payment.

 

Offering to finance the Purchaser of your property can help you sell it quickly and provide an excellent source of income. Creating a high quality mortgage investment, however, should be of primary importance to you. Before making the decision to finance the Purchaser we strongly suggest that you consult with your Attorney and your Realtor.

Use these links to obtain a credit report on the Purchaser prior to closing the property sale:

Equifax Credit Bureau

Experian Credit Bureau

Trans Union Credit Bureau

The Mortgage Buyer, Inc • PO Box 100 • Hillsdale, NY 12529 • 1-800-618-2485 • email: John@TheMortgageBuyer.com