Melbourne Real Estate News, Brevard County FL Real Estate by Sandy Shores REALTOR®

I know that times are tough.  Will it get tougher in the coming weeks and months ahead, before it gets better?

None of us really knows what the future will hold for any of us.

We have just heard that Bernanke has dropped the Fed funds rate  down to 1.5%.  Will that bring confidence to the market? 

We have heard that banks and lenders have tightened their guidelines on lending money for mortgages.  How tight will it get? Will it be harder for buyers to get loans or are we just bringing some "normalcy" back to our mixed up markets?

We have seen many creative marketing tools being used to help sellers move their homes more quickly off the market. 

So, is it time for owner/seller financing to make a comeback? 

Or has it already come back in some areas of the country?

A large number of homeowners are not in a position to offer favorable financing options to potential buyers in the market. Many are going into foreclosure or short sale.

But, owners that purchased more than 5 years ago and own their homes free and clear may be excellent candidates to offer a buyer a low rate, owner financed loan. Essentially the owner agrees to hold a purchase money private mortgage on the home.  The buyer makes their mortgage payment to the owner, instead of an outside lender.

Ten years ago, I purchased several rental houses with seller financing here in Brevard County Florida.  The sellers and I were able to work out favorable terms for both parties.  I paid those loan payments every month for years, until interest rates dropped and I refinanced the loans for lower interest rates, and paid those seller financed loans off.

Considerations of owner/seller financing for a seller*: 

The owner may be able to sell the home more quickly, than a home that requires a new first mortgage from a lender or a bank. 

Often qualifying is easier for a buyer on owner financed homes.  It depends on the seller's criteria.

The owner typically gets a sizeable down payment upon the sale of the property.

If the house is an investment property, then capital gains can be deferred on the home.  The owner must only pay gains yearly on the amount they receive, as they receive it. They don't have to pay gains in one lump sum in the year of the sale* (please check with your accountant). 

The seller receives monthly principal and interest payments.  Thus, they may net more for the home over a period of time, because the buyer is paying interest on his principal loan amount.

Typically, the interest rate on an owner financed property is a bit higher than lender rates, because of the favorable terms of the loan and no closing costs to the buyer, and the riskiness of the loan.

REMEMBER:

There is a certain amount of risk involved in holding a private mortgage for a buyer.  Owner financing will not allow a seller to completely walk away from a property at closing.  The seller will still have a long term relationship with the buyer. If the buyer does not pay the mortgage, property insurance or the taxes, the seller may be forced to foreclose.

Considerations of owner financing for a buyer*:

Often times easier qualifying than going to an outside lender.

Typically, no closing costs, that are otherwise required by a lender.

May be able to purchase a home that a lender with tight restrictions would not have lent you money on.

REMEMBER:

Owner financed homes may require a more substantial down payment than a lender financed property.

*Please be advised, I am not an accountant.  Owner/seller financing is not for everyone.  Please discuss your indivdual situation with an accountant to determine what the best course of action for you is.

So, will we see a comeback on seller financed homes? 

Or have sellers in many parts of the country already offering it?