The $6.6 Trillion Funding Source.

According to the National Association of REALTORS (NAR), as of February 2009, the size of “owner occupied” residential real estate is $20 trillion, and the size of commercial real estate is $5 trillion. According to US Census Bureau 2000 Census, 33% of all “owner occupied” residential real estate in the United States was owned “free and clear.” That is, there were no mortgages on those houses.

This author understands that due to the real estate boom and bust in the past 8 years, the very houses which were “free and clear” may have  been financed, and the houses which had mortgages on them may now be “free and clear” due to mortgage pay off or foreclosure. So until Census 2010 is released, we can safely assume that up to $6.6 trillion worth of “owner occupied” residential real estate is available “free and clear.”

According to the Federal Reserve, at the end of the third quarter of 2008, the mortgage debt on commercial/multifamily properties was $3.4 trillion. This means that the owner equity in commercial properties is around 32% which is almost the same as the “free and clear” number for owner occupied residential properties. 

Additional drill down into a property's title data, in terms of age of the owner and the length of ownership could reveal potential candidates for “free and clear” residential and commercial properties. It is safe to assume that older owners would have more equity in their properties, and may entertain alternative financing proposals compared to younger owners who may have a mortgage and are not able to make independent decision. Also, a retirement age owner may entertain monthly payments over a period of time instead of selling the property and then wasting his/her money with Wall Street.

It is interesting to note that according to Census 2000 33.4% of the US population was 45 years old or older which means that today at least 33% of the US population is 54 years old or above.

According to the NAR, In 2008 approximately 5 million existing houses out of 125 million (according to American Planning Association) were sold in America at $198,000 = $976 billion. At 5% interest rate Americans paid 48 billions to banks.

I have not yet found data to estimate how many of those 5 million existing houses were "free and clear". Let's say that only 20% of those houses in the market were "free and clear" and that only 1 in 10 of those sellers could be convinced to enter into a seller-financing arrangement. 

That's 100,000 houses sold for around $19.5 billion. At 5% interest, we are talking about $976 million which those 100,000 owners could make at an average of $9,760/year. That is a fairly reasonable amount to complement social security income instead of risking their capital with Wall Street, or making 1.75% which is the average percentage banks have been paying to their depositors.

Note: Low 30's seems to be a good percentage. So if you want to wing a number, 30% seems to be a pretty good bet. LOL!