Do you own a house you’re thinking about selling? Selling the traditional way – using an agent and the MLS – will give you access to some traditional buyers. While a viable option for many, it’s not always the best option. If you want access to more buyers and want to maximize your yield, then it may be worth taking a look at providing owner finance. Just as with a traditional sale, seller financing is not always the best option and is not a one size fits all solution and there are many ways to approach owner financing. It all depends on your unique situation and what you want. Keep reading to learn more about the basics as well as some pros and cons so you can determine if it’s worth looking into further.
Introduction: Sell My House With Owner Financing In St. Louis Missouri
When a homeowner sells their home the traditional way, the buyers are almost always going to get a mortgage via a traditional lender, such as a bank or credit union. Depending on your market and your house there may or may not be a strong pool of buyers. In general, if your home is selling on the low end or high end of your market then you’re going to have a smaller pool of qualified buyers. This is not only due to less people being interested in the home at all, but there’s the additional problem of having less buyers that can get a traditional mortgage in the low and high end of the market.
While sometimes the traditional sale is a simple process, it all too often becomes troublesome. In fact, if you want to see a story about clients we recently helped that were unable to sell their house (in a very desirable area mind you), even though they had an experienced real estate agent, then take a look HERE. You may have to leave your house for showings more than you care for. Or maybe you’ve accepted contracts only for the buyers to walk away after an inspection or their inability to obtain a mortgage. Then you start wondering if you want to go through the process and risk the hassle all over again. We’ve had clients have several contracts with traditional buyers fall through on the same house.
If you want to increase the likelihood that you’ll sell your house, and expand the range of possible buyers who can buy, here’s a little-known strategy you might not be aware of: sell your house with owner financing. It really isn’t scary and complicated like people think. When you work with knowledgeable professionals, like Missouri Cash Buyers, it can actually be much simpler, save the seller expenses, and require less signing.
Owner financing is when a buyer skips the bank and buys directly from you. In essence, you’re the bank! And who doesn’t want to be the bank? There are many forms of owner financing, with the two common forms being subject-to an existing mortgage and Contract For Deed (an installment sale). No matter what approach the basics are simple. You, the seller, would take monthly payments and in some cases would hold the deed until the house is fully paid off, at which time the deed transfers to the buyer. Common reasons people don’t qualify for a traditional mortgage include credit score and self employment or other income streams that don’t get recognized as income. This is NOT like a rental. Remember, you are selling, not renting. The buyer is responsible for insurance, repairs, and maintenance. The benefit of selling to real estate investors is you don’t need to worry about it, because you’re dealing with experienced professionals that are going to ensure everything is covered properly. For instance, as the lender, you (the seller) will want to be named as mortgagee and will need to be sure your mortgage lender (if any) is named as mortgagee on the buyer’s home owners insurance.
Benefits of selling traditionally with agent:
- Seller gets all available equity (if any), minus seller costs, at closing
- FALSE security of selling traditional way
Cons of selling traditionally with agent:
- Less Buyers
- Seller typically pays 6% in commissions and fees
- Seller typically pays 2% in closing costs
- Up to 15% of sales abandoned on inspection & financing contingencies
- Sale is typically subject to an appraisal
- Uncertainty if or when it will sell
- Typically multiple showings
- Typically takes 30-60 days to close
- Repairs, however minor, are often requested and negotiated
Benefits of selling with owner financing:
- More buyers
- Professional investors can typically close within 7 days
- Potentially defer capital gains
- No repairs or cleaning necessary. No-hassle process
- Typically get more money in your pocket
- Continuous cash flow every month
- Can potentially sell the note (financing) if wanting to cash out at some point
Cons of selling with owner financing:
- Typically takes longer to get all the money out of the transaction
- Being unfamiliar with the concept can be frightening for some
Start by deciding how much money you want to get for your house every month.
If you’re serious about selling on owner finance then I cannot stress enough the need to sell under one of the below scenarios:
- Sell to professional investors, like Missouri Cash Buyers
- Use a competent attorney that has experience with real estate transactions (particularly owner financing) in your state!
Real estate is highly regulated with a lot of laws. If not done properly, you could cause yourself some serious legal problems. Talk to a professional real estate investor or attorney!
Selling with owner financing isn’t for everyone, but if you want more exposure to buyers and cash flow every month, then owner financing might be right for you. We do it ourselves and you can check out our inventory at https://www.BecomingAHomeowner.com/