Copyright 2006 Ron LeBlanc
When I first heard about people lending money to facilitate people buying their properties, I was puzzled and asked just that question. I thought people were selling because they needed money and wanted the proceeds from the sale of the property. But then I was looking at it only from my narrow perspective.
There is a way of acquiring real estate that can be done with little or no money down and even if you have bad credit. That method is known as "seller financing" or "seller carry" or sometimes in ads as "owner will carry". When I saw that last one I thought – how could they carry me? They don't know if I'm heavy or not! Ok, sorry for that.
There are many possible reasons why someone would want to lend you money to buy their property, and of course for the reasons mentioned above you may want to seek this kind of financing out. The most common reason someone would want to do this is the case of a retired person who has held the property as an investment for a long time.
As a real estate investor should know, there are taxes to be paid on the gains from the sale of real estate. In the case of a person who has had an investment property for a long time, they may not want to send the taxman 30% of their gain. By financing the buyer, they are foregoing the lump sum cash out for the short term and gaining a steady monthly payment for a longer term. By spreading out the gains, they spread out their taxes.
There is also the case where someone has a property that has been very hard to sell. Maybe they just can't find a conventional buyer. By offering financing, they are marketing to another whole set of potential buyers. Yes, of course, there is a higher risk of default in this case, but what is the worst that could happen to them…they get their property back through foreclosure and they keep the money the buyer already paid! Not that bad of an outcome for them!
There are also possibilities where because of a divorce or something, the seller can't accept a large lump sum at one time, or someone will be out for a big part of it. Maybe someone wants to secure an income for their heirs and they don't want them to get a big chunk at once. There are an infinite number of possibilities.
So you ask – Where can I go about gettin' me one o' dem properties? The first place is to look for the phrases I mentioned above. Ads in the papers may have "OWC" in there to save space. Those sellers are saying they are willing to finance. You should also check "for sale by owner" or FSBO ads, they may be willing to carry.
The other common method of finding them is to look for properties that have sat on the market for a long time and see if the sellers are wiling to consider it. Many sellers of troubled properties may have had no idea that it was even possible for them to carry financing – after all, they're not a bank!
It is actually very simple to make this happen. Talk to a realtor or preferably a title company and they should have no problem directing you to the proper way to do it. It is done all the time and you can even consider having the seller carry back a second mortgage for the remainder of the sale price. This can allow you to go in with little down. Some lenders may have a problem with that, but you should not have a difficult time finding one who will do it. Happy hunting!
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Ron LeBlanc is a real estate investor who is also a licensed engineer and Realtor. He lives with his family in Boulder Colorado - the best place on earth to live. He enjoys helping others realize their dream of financial independence. Visit him at
http://www.boulder-realestate-investors.com
