✅ How Owner Financing Works:

1. Agreement: The seller and buyer agree on a purchase price, down payment, interest rate, and payment schedule.

2. Promissory Note: The buyer signs a legal document (note) promising to pay the seller under specific terms.

3. Deed Handling:

   • Sometimes the buyer receives the deed immediately (known as a “deed transfer with mortgage”).

   • In other cases, the seller keeps the deed until the balance is paid off (called a “land contract” or “contract for deed”).

✅ Key Features:

• No bank approval needed.

• Faster closing process.

• Flexible terms, including payment schedule and interest rate.

• Useful for buyers who may not qualify for traditional loans (due to credit or income verification).

✅ Benefits for Buyers:

• Easier qualification

• Lower closing costs

• Negotiable down payment

• Flexible terms and faster move-in

✅ Benefits for Sellers:

• Can sell property “as-is”

• Earn interest on the loan

• May attract more buyers

• Tax benefits from installment sale

⚠️ Risks to Be Aware Of:

Buyer’s Risk:

• Higher interest rates than banks

• Risk of foreclosure if payments are missed

• Fewer consumer protections than traditional loans

Seller’s Risk:

• Buyer default

• Legal action may be required to recover the property

🏡 Example Scenario:

A seller lists a property for $300,000 with owner financing available. A buyer offers:

• $30,000 down payment

• $270,000 financed by seller

• 6% interest over 15 years

The buyer makes monthly payments directly to the seller, and either gets the deed now or at the end of the payment term, depending on the agreement.