Owner Financing Actually MORE Expensive Than Conventional?
I have never used owner financing but I am curious about it. I think most books and individuals I am familiar with mention the low closing costs as a big benefit. What I'm wondering about is whether or not you actually save money or if it costs you more. Again, I haven't tried owner financing but I would guess that even if someone was willing to owner finance, they would accept less money if you offered cash. If you save on closing costs but you could have purchased the property for $1k to $5k less for cash, that seems like a losing deal. Strangely, I have never heard anyone address what appears to be a obvious potential drawback. Has anyone ever had someone offer them owner financing and then tried to see if they could get a lower price for cash? For all I know there may be owners that prefer the steady checks instead of cash.
Hey,
Money talks. Period. Amen. Full stop.
If you have the cash, you can expect a discount on the selling price. If you remove the finance clause and drop a large earnest money check off (not directly to the seller), expect a big discount.
Owner financing is used (primarily) when you can't get other financing. If it is a better deal than paying cash all depends on the numbers.
Also depends on your exit strategy. If you want to hold for a shorter term, the numbers might work better to have owner financing. If you have good credit, the owner can wait 45 days, the house is in decent shape, you have the down and closing cost money, and you intend to hold for a longer period of time the numbers might work better to have conventional financing.
Think about your exit strategy, repairs, closing costs, down, holding costs, what you might need to fund your next project, and then work the numbers.
Brenda
You're right...in theory, but in real life other things happen.
Some people don't share that attitude. I've worked with sellers who are stuck on a number (price) but don't care if they carry it or if you cash them out. You can spend all day telling them how cash is king, and because of the time-value of money....bla, bla, bla. When the deal is said and done they want to see their price on the HUD.
Owner financing does not include origination costs, fees, etc, that normally accompany getting a loan. Additionally, it can happen very quickly and be done with very few headaches. Many times you can get a MUCH better interest rate, and more flexible terms with seller financing.
All things being equal, seller financing is the way to go.
Do one of each, and you'll know exactly what I mean.
Speed can be very attractive to sellers. If you tell them you can close in 7 days, that's MUCH better than most of the other offers that will be 30-60 days.