When a home is for sale by owner, there is always the possibility that the owner wants to provide financing for the home. How this works is the owner assumes the same role that traditionally a bank or mortgage company fills. For sale by owner situations can help the seller save commission costs and offer buyers with difficulty obtaining a bank loan an opportunity to purchase a new home.
For whatever reason, many people who want to buy a home have difficulty obtaining a loan from commercial lenders with strict requirements. They may have a cash down payment ready in their pockets and a steady income to pay monthly payments. Here, the potential buyers will benefit greatly from a for sale by owner situation where the seller wishes to provide owner financing.
For Sale By Owner Promissory Notes
If the seller decides to provide owner property financing, he or she should draw up a promissory note to set out the repayment plan. Promissory notes are important legal documents that can eliminate misunderstandings. Banks and mortgage companies always have borrowers sign real estate notes. In a for sale by owner situation where the owner will finance, the promissory note is highly recommended, but not required.
If a note is constructed properly, the seller may decide to shop the note to promissory notes buyers and earn immediate cash. He or she may decide to sell the note to pay for a second home, a car, or a vacation. Some sellers grow tired of collecting monthly payments, or never felt strongly about financing the loan in the first place. A threat of foreclosure can also drive the owner to sell the note.