If you watched the last Presidential debate Wednesday night you probably noticed that Barack Obama and John McCain agreed on at least one thing. The economy is in the tank and it needs HELP!

Now that we have found common ground for economists, Democrats, Republicans, and Independents alike, what can we do about it? And what does this have to do with seller financing?

An essential key to stimulating the economy is access to credit. Not only have banks stopped lending money to the average Joe six-pack, they have stopped lending money to each other. From a business manufacturing goods to buyers purchasing real estate, it takes credit to get the deal done.

This is where seller financing comes in. When real estate mortgages are difficult to obtain, buyers and sellers start finding solutions. One ready-made solution is for the seller to “be the bank”. The seller financing solution has been around for years with heavy use during the 1980’s when a weak economy was combined with double-digit interest rates.

A real estate deal can be completed without bank financing by allowing a buyer to make payments over time to the seller. Once a seller accepts financing they have three choices.

1. Collect the payments and interest for a monthly income for the full term of the note (net of any monthly payments the seller might still owe from when they bought the property).
2. Set a date by which the buyer must obtain bank financing to payoff the remaining balance in full (also known as a balloon payment). This allows for temporary seller financing until the banks are once again lending freely.
3. Sell the note payments for cash now to a private mortgage investor. Investors will purchase all or part of the note payments at a discount. The seller has cash now and the buyer makes payments to the investor.

Owner financing can provide a win-win solution for buyers and sellers alike. The seller is able to move a property quickly in a tough economy or real estate market. While a buyer wanting to take advantage of low real estate values can finance deals without a bank.

If seller financing sounds like the solution you’ve been waiting for, please be sure to read Owner Financing? The Top 5 Things to Consider!