Robyn Seymour - Should You Sell Without a Down Payment by Offering Owner Financing?

Selling a home with Owner Financing. There are a number of questions I have been asked when selling a home by offering owner financing.

One typical question I am asked often..."I am selling my home and offering Owner Financing, but having trouble finding a good candidate with a good down payment. Should I take a chance and allow a buyer to put no money down?"

I tell my potential clients that it is never a good idea to sell a home without a down payment from the buyer. You want the buyer to invest some of their own money into the home. If they have their own money involved, they are more likely to take care of the home, keep up with maintenance and pay the bills associated with home ownership. You want the potential buyer to show some commitment to the home.

How many times have you come across a rental property only to see it run down? That renter had no equity in the home. They would not be loosing any of their own money, therefore; might not care about the property or its condition. What are they loosing? They can walk away and find another place to live, leaving you with the responsibility of upkeep and making any repairs needed. If you intend on selling this mortgage note down the road, you want the buyer to have some equity in the home from the start. The more equity your buyer has, a contract buyer is more likely to purchase the note.

Example:

A home is selling for $100,000 and the potential buyer can put down $20,000. This buyer is already starting with a 20% equity position. A contract buyer likes to see that. You might suggest that a potential buyer secure a personal loan for the down payment. Can they receive a loan from a relative? Do they have a credit union or can they borrow against their 401? In some cases, you can receive a hardship withdrawal from a 401 for the down payment towards home purchase and not have to repay the sum withdrawn. They then give you the money for the down payment. This option gives you the cash down payment, the buyer has the commitment to the home and a contract buyer will see equity.

Make sure that you have a well qualified real estate lawyer to help you before making any final decisions regarding the sales of your home.