Owner Finance for Residential Properties - Only Common in Struggling Markets?

Question

Many of the legit and non-legit real estate gurus seem to tout owner finance.

I've asked around where I am - in a big metro area with a healthy economy - and people seem to laugh when I bring the topic up, like it doesn't typically exist.

However, I see owner finance deals actively advertised in some struggling cities and rural areas.

Are owner finance deals only trypically common in markets where the economy is in the toilet?

Brian Gibbons · Answer

Account Closed

The Model that you should present to Sellers is "Cash Or Terms".

Then look for a seller problem, like Divorce, Job Transfer, No Equity.

I advise you name your company something like Deplains Property Solutions, LLC.  You Solve Problems!

Direct mail to good school districts, say you will buy their home, cash or terms.

In IL you have land trusts, sub2, contract for deeds, lease options, wraps, private mortgages for free and clear homes, and more tools.

I do feel that you getting success stories on a few deals before you talk with agents is a good idea when you are new.  Many agents want a traditional cash sale, getting their commissions quickly.  And their broker - manager doesn't want to get involved with anything other than a traditional cash buyer.

When I market for houses, I love expried listings, where they tried with an agent, and want to look at other ideas, like cfds, sub2, lease options, etc.

Tired landlords come next.

And, a Creative Deal is is always negotiated in person, at the kitchen ta;ble with the seller, and getting an agent to not talk while I present the offer is not an easy feat.

Bill Ham · Answer

Account Closed

Now your getting it!

Bill Ham · Answer

Account Closed

You definitely don’t want to start going around agents. There are several steps to getting an agent to work with you on a seller financing offer.

Explain to the agent why this offer solves the sellers problems and why its good for them.

Explain how the agent will get paid.

Get the agent to help create the offer.

Only submit the offer once the agent is on your side with it.

Never call an agent and mention seller financing. This makes you look broke. Only make this kind of offer when a seller has needs that the offer will fix.

William Robison · Answer

Hello Account Closed

My experience with owner finance is fron a few catergories.

One, a seller that has some equity and needs to move fast.

Two, a seller that is under water and needs to move and is willing to let someone else pay down the mortgage until the market returns.

Three, a seller who doesnt know that he wants to owner finance but is retired, or working on an investment plan that would be interested in a higher return rate for his money that what the bank will offer him/her when they sell.  Typically a free and clear house and a healthy seller.

Four, once in a blue moon, a realtor will let a house sell with owner financing.  Here may be the reason that you are "laughed" at.  Realtors want a commission and they are concerned about how they will get it if there isnt enough money changing hands with the transaction.  Responsibly, they have a fiduciary responsibility to the seller to present all offers.  A buyer or a buyers agent can also request on being present at the offer presentation to the seller.

Item two is not too uncommon and likely what the gurus are telling you.  However, my guess is that it is one way the gurus are telling you that you can pick up a property with no credit and no cash.  They are few and far between, but not non-existent.

Best wishes.....If this is what you really want, be ready to search long and hard for the right deal.  The last one that I put together was a combo of three and four.

Account Closed · Answer

Thanks so much all for the interesting and varied responses.

Owner finance negotiating seems easy compared to...the time involved in finding owner finance properties.

Guess that's what I should weigh....

In a market like this where there are still lots o' bargain properties, would it be more effective to pay cash on small properties and get that cash back quickly, or make more of a time investment for owner financing to get that awesome leverage.

Account Closed · Answer

Thank you @Bill Ham

I see now that it's a matter of establishing a relationship with an agent first, and later pitching owner financing as a means to solve the seller's problems and giving the agent business

Account Closed · Answer

@Bill Ham thank you for the two responses, this is very inspiring.

My biggest issue has actually been being able to actually reach the sellers and sit down with them and hear out their concerns.

I've tried contacting agents, and they generally say something to the effect of 'My seller isn't interested in hearing your owner financing offer.'

But obviously the seller may be if the offer competitively suits their needs.

My thought of the most efficient way of doing this would be to go around the agent (at least initially) and research owner contact information for MLS-listed properties that I'm interested in, then to contact the owner and see if I could talk to them directly.

Would you consider this an efficient strategy for contacting potential owner-financers?

Or to resort to other tactics like posting signs, calling FSBOs, networking, physically looking for abandoned properties, etc.?

Just seems like this latter list of options would be much more time-consuming than actually calling property owners who have already posted their property for sale.

Account Closed · Answer

Thanks William this is very insightful.

Seems important to weigh time put into such a deal versus cash invested in a more traditional deal.

Derek W. · Answer

Seller financing is possible in every market at every price point. But don't expect to get these leads from Real Estate agents. Though possible, its one more hurtle to jump. I recently sent an offer to an experienced agent (licensed for 15 years) asking for the owner to carry, the agent emailed back "Is that even legal?"

Often a great source for seller financed properties are retiring landlords. A common goal of landlords is to work hard to pay off the property so they can convert the house to a note. Then they have mailbox money coing in every month without calls about leaking plumbing. And best is you don't have to convince them to carry, they will offer it to you!

Account Closed · Answer

Tanner,

The best way to get owner finance is offer them full price and at least 20% down.

Joe Gore