It was one of the first signs of a weakening housing market. Builders desperate to move increased inventory started offering incentives in hopes of enticing buyers to their developments.

These incentives ranged from the standard closing costs and free upgrades to the more elaborate offers of pools, boats, cars, motorcycles and even cash back rebates.

In the face of a tightening credit market homebuilders soon came to realize that just getting a buyer financed was the major hurdle. What good are granite counter tops or a new Harley Davidson if the buyer can’t even obtain a home mortgage loan?

Now enters the latest form of builder concessions – the offer to seller finance the property for the buyer.

In Chicago Illinois a builder is offering seller financing on their 20-unit Fletcher Row townhouse development where units range from $499,900 to $749,900. Owner financing is available with 10% down and rates as low as 4.99%. (Source: Chicago Tribune Article, May 29, 2009)

Just head south to sunny Florida to locate seller financing on the luxury Intracoastal Waterway condos offered by Commercial Alliance Group (CAG). The company launched its owner financing program in direct response to the bank liquidity crisis.

“In spite of the low interest rates, real estate purchasers continue to have difficulty obtaining bank mortgage financing. CAG is providing mortgage loans to its purchasers without complicated and painful underwriting processes,” said CAG Vice President Scott Colon. (Source: Business Wire, January 9, 2009)

In fact their seller financing program is just one of several incentives available. You can also obtain over half off a variety of boats to keep at your personal onsite marina slip.

Long a staple of hard to finance properties, the installment sale is increasingly being offered on more mainstream properties.

Owner financing allows the buyer to make payments to the seller over time for the purchase of property rather than obtaining a traditional bank loan. This creative financing alternative is helping owners get properties sold during the credit crisis, even when banks say no.

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!