What Is Owner Financing?

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What Is Owner Financing?

Owner financing is a type of real estate home sales arrangement in which the buyer obtains financing directly from the person or institution that is selling them the property. This often occurs if the buyer can’t obtain a normal mortgage or home loan for whatever reason. It can also be a viable option in cases where the buyer is unwilling or unable to pay the going market interest rates.

Owner financing is sometimes called "seller financing", "creative financing" or other similar names. It is often related to, but not always the same thing as a contract for deed.

What Are Some Legal Issues to Consider with Owner Financing?

Owner financing is not the conventional method when it comes to real estate finance methods. As such, it is often associated with specific legal issues and concerns. Some of these include:

Thus, owner financing arrangements tend to be individually tailored to the needs of the seller and the buyer. It’s important that the house be properly appraised and inspected in order for the financing aspects to be fair and equal.

What If I Have a Dispute over Owner Financing?

Disputes over owner financing can happen at many different stages. For instance, there may be disagreements or conflicts during the negotiation phases of the sale. Or, a dispute can come up later on, after closing (for instance, with regards to repayment of the financing amounts). These types of disputes may require legal assistance or a lawsuit in order to resolve. In such cases, a monetary damages award will usually suffice as a legal remedy for the non-breaching party.

Do I Need a Lawyer for Help with an Owner Financing Arrangement?

Owner financing arrangements have many advantages for both parties. However, they need to be done correctly and with proper foresight in order to avoid long-term conflicts. If you will be engaging in an owner financing agreement, it may be in your best interests to hire a real estate lawyer. Your attorney can represent you during negotiations and can review the contract to ensure that your rights are protected. Also, if there are any legal conflicts, your lawyer can help you file a lawsuit and can represent you in court.

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Last Modified: 12-30-2014 03:10 PM PST

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