Owner Will Carry

Under some unique circumstances, a seller/owner will sometimes provide all or part of the buyer’s financing. The most common is that the seller will carry a small portion of the total sales price (5% or less) to assist the buyer with closing the deal. The buyer will agree to payments including interest and other fees to be paid monthly. The loan may also have a balloon payment, say for example at 5 years, where the balance remaining comes due and payable in full. This might be done because the buyer does not have enough money to complete the purchase. However – this has to be disclosed to the loan company and depending on the type of financing that is being used – it might not be permitted. For example, a FHA or VA loan likely would not be able to do this. Your loan officer can tell you for certain what is permitted and what is prohibited.

In some very rare cases, the owner may own the property free and clear. Should a buyer come along that is the seller really trusts and the buyer puts down a large amount (from 25 to 75%) the owner might carry the rest. A buyer might need to do this because of poor credit or income issues where it is not as steady as a normal loan company would like. If the owner has a loan on the property, there might be a demand clause that says if the property is sold, the loan must be paid off in full. Such a clause could prohibit the selling of the property with OWC.

Most of the time, OWC deals are at higher interest rates then conventional loan sources. As much as 2-3-4 % or more higher is not uncommon. Also, the owner/sell might want the payments made thru a processing service. When this occurs, the cost of the loan processor may be added to the cost of the payment.

Like all other things in real estate, the terms for Owner Will Carry are part of the negations. If you have to use OWC to complete the deal, it is highly recommended that you use a legal professional to review the contract, regardless of if yo are a buyer or seller.