The Pros & Cons of Owner Financing

Real estate agents and Idaho home sellers need to consider a variety of marketing strategies when listing a property for sale, especially when the market shifts due to high-interest rates on home loans. This may mean being more flexible and creative with the offer terms. One option to consider while marketing the property is to promote and offer owner financing.

Pros Cons of Owner Financing

Pros for Buyers

A major benefit for buyers with owner financing is it gives them more financial freedom. Although a buyer may be very qualified, a traditional mortgage lender may not approve them because of its strict guidelines. A great example could be that a buyer has assets tied up in a business or another property and they just need a few months or years to liquidate those assets into cash. The buyer can also save thousands on loan fees.

Cons for Buyers

Many owner-financed loans have a much shorter term than a traditional mortgage. Instead of 20-year or 30-year loan periods, a seller may only agree to a 3-year or 5-year term and require a lump sum balloon payment at the end of the term. Owner-carried contracts can also have interest rates above the current market rates.

Pros for Sellers

If a seller owns their property free and clear, an owner contract has many benefits. The first benefit is it opens up your property to a larger pool of buyers which could mean fewer days on the market. If one does not need the cash, it also means more money in their pocket in the long term because they are collecting interest on top of the purchase price. If the buyer defaults, the seller still owns the property and gets to retain the down and principal payments already made on the property.

Cons for Sellers

The seller does not get the full proceeds from the sale right away. If the event the buyer defaults, the seller would have to foreclose on the buyer and this process can be tedious. The seller also has to start from scratch on listing the property for sale to attract new buyers.

Final Thoughts

There is no cookie-cutter way to structure an owner-financed loan. As long as both parties agree to the terms, there are many possibilities available. I would highly recommend both parties review the contract with their prospective attorneys, accountants, and insurance agents to ensure they are protected. Using a third-party long-term escrow company to manage the monthly payments and the escrow account is also very beneficial. When negotiated correctly, this scenario can be a win-win for all parties. 

2368 Properties
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$768,800
Neighborhood: Bridgetower
5
Beds
3
Baths
2,906
Sq.Ft.
2008
Year Built
1
Day on Site
98872569
MLS
Welcome to this stunning 5-bedroom 3-full bath home located in the highly sought-after Bridgetower neighborhood. Community offers 2 pools and mature walking paths. The spacious gourmet kitchen...
Open 4/1
2301 W Regan Ave Boise,  ID 83702
$548,800
Neighborhood: Pleasanton Add
4
Beds
2
Baths
2,163
Sq.Ft.
1890
Year Built
1
Day on Site
98872571
MLS
An original vintage 1890's farm house in Boise's West downtown, this home is for sale as a part of an estate and would make a great project for someone looking to maximize its historic curb appeal...
$799,900
Neighborhood: Ranch
3
Beds
2
Baths
1,656
Sq.Ft.
1986
Year Built
1
Day on Site
98872572
MLS
Rare, one-of-a-kind, property on the Robie Creek Plateau in the Ranch Sub. Located above Robie Creek w/an incredible mountain meadow setting & outstanding views. Fully irrigated & fenced paradise...
Open 4/2
1512 S Florence St Nampa,  ID 83686
$349,000
Neighborhood: Canyon Meadows
4
Beds
3
Baths
1,611
Sq.Ft.
2006
Year Built
1
Day on Site
98872573
MLS
Set on a large corner lot, this inviting home has been recently updated with fresh paint & new flooring throughout. Open concept floor plan with two entertaining spaces, lots of windows and vaulted...
$245,000
Neighborhood: Kurtz Add
2
Beds
1
Baths
1,377
Sq.Ft.
1947
Year Built
1
Day on Site
98872576
MLS
Great opportunity for investors or first time homebuyers! Just a couple blocks from NNU, this home is in the perfect location close to the university, parks, shopping, restaurants, and so much more....
Open 4/1
5725 S Moonfire Way Boise,  ID 83709
$354,950
Neighborhood: Peppertree
3
Beds
3
Baths
1,478
Sq.Ft.
2014
Year Built
1
Day on Site
98872577
MLS
Hard to find 3br 2.5 bath like-new condition! Open living and kitchen area. Numerous upgrades include Bosch dishwasher, dual-fuel double oven, granite counters, beautiful plank engineered wood...
$980,000
Neighborhood: Owyhee Terrace
5
Beds
3
Baths
3,426
Sq.Ft.
1958
Year Built
1
Day on Site
98872405
MLS
EXTREMELY RARE - All Brick, Single owner, Immaculately cared for, 5 Bedroom 3 bath ready to move in home! Single story ranch style on a very quite cul-de-sac located on the Boise South Bench. 3,426...
Open 3/29
1197 W Eiger Dr Nampa,  ID 83686
$699,900
Neighborhood: Summit Ridge (Canyon Co)
4
Beds
4
Baths
2,632
Sq.Ft.
2022
Year Built
1
Day on Site
98872578
MLS
The amazing Hailey XL by Brookstone Custom Homes. This well thought out and versatile plan delivers 3 bedrooms on the main level plus a large bedroom, full bathroom and a nice size bonus room...
$469,900
Neighborhood: Pepper Hills Su
3
Beds
2
Baths
1,759
Sq.Ft.
2001
Year Built
1
Day on Site
98872586
MLS
Find plenty of room to roam in this immaculate home nestled in the peaceful community of Pepper Hills Subdivision! Featuring 3 bedrooms, 2 baths, plus an additional office in nearly 1,800 square feet....
$399,000
Neighborhood: Camelot Sub Ada
3
Beds
2
Baths
1,342
Sq.Ft.
1974
Year Built
1
Day on Site
98872590
MLS
Welcome Home. Don't miss this well-maintained, single level 70's charmer. Conveniently located in West Boise, this home offers a flexible floorplan that allows for entertaining and comfortable...
$3,200,000
Neighborhood: Hazen Ranch Estates
4
Beds
5
Baths
5,705
Sq.Ft.
2024
Year Built
1
Day on Site
98872591
MLS
To be built: Exceptional opportunity to build in one of Eagle's most desirable neighborhoods, Hazen Ranch Estates! Fantastic design boasting 5,705, which is fully customizable on the last lot...
$60,000
Neighborhood: 0 Not Applicable
2
Beds
1
Baths
728
Sq.Ft.
1974
Year Built
1
Day on Site
98872595
MLS
$425 lot rent. $75 for water, sewer, trash Two bedrooms one bathroom. Comes fully furnished with Couch, coffee table, kitchen table, bed, washer, Bookshelf by front door, glass top desk and chair,...
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