In These Times, Does Offering Owner Financing Make Sense?

Since we are in a new year, just brainstorming on what to do. Assuming market improves (or not) does it make financial sense to offer owner financing on a residential property where it is paid off or can be?

Off the top of my head, I am thinking:

Pros: may be able to get technically a higher price; may get a bigger buyers pool too, income stream, installment sale impact on taxes, new owner takes over all property taxes and responsibilities.

Cons: Risk of buyer defaulting, you don’t get that net lump sum to play with.

Anything else?

Thought the attractiveness of owner financing to sellers is lower than market mortgage rate. How does an owner of a fully paid house offers that?

I got the impression only elderly sellers would offer owner financing. For sellers who want to buy another house (Primary or investment), you would be handicapped with the housing loan of the owner-financing house.

How about owner financing with a ballon clause at Year 5 or something? Buyer needs to refinance you out of the loan at the end of Year 5. You got sort of a middle ground. The risk of a deadbeat buyer is still there though, and I am not confident SF/CA laws will make the seller whole.

In any other city/state I’d give this idea a serious thought. But for SF/CA? Nah. Better play it safe.

1 Like

Ok, I am not an elderly seller but getting there and I would do this on my Sunset home that would be paid off. I don’t need the money for any new place. The interest or mortgage received would serve as another revenue source.

So, would this work?

Owner financing is very common now according to my title company. It can help a seller differ some taxes and maybe avoid some if you die . A local seller had his property on the market for years as a FSBO. It was always priced over market. I remember thinking is was overpriced at $1.5m for a former gas station. Anyway John Runnels sold it to a naive buyer for $4m after being on the market over 10 years . A great deal… only one problem… he died at 73 last week, 6 months after the sale…. Don’t wait too long to sell.


Well, like anything and everything, proper price setting is key to a timely sales transaction, right? Owner financing is not new, but I am just thinking it might work even more in an environment where high rates are disqualifying some buyers who do not fit the traditional borrower profile. And sure, more risk involved. And to find out there are positives (tax advantages) it may be something to consider or offer (esp if subject property is paid off). Now, my agent thinks in SF there are simply too many buyers with cash anyway that offering such an option may not garner that much more interest as say in other RE markets.

(RIP Mr. Runnels)

1 Like

I agree with the balloon clause. You want a date where you get your money in full. People used to sell land this way, because land financing is much more difficult. It was sold land contract (seller financing) with a balloon payment.

1 Like

Right, some “end date” to the transaction I would suggest wholeheartedly. Like @Elt1 hinted at, we don’t live forever (LOL)

Newbie here, so could you explain why you would not do a lease option with a purchase agreement say after two or three years? I would see it as securing a large down payment $10,000 in case the seller is unable to follow through. You are still attracting the same amount of risk in my opinion but you would also be renting out the property which is free equity over whatever term you selected?

If you still wanted to be done with the house after the term and the seller was still unable to secure a loan you could then owner finance yourself out of it then correct?

Runnels was a classic Tahoe character. His Runnels Motors was notorious. The city forced him to remove all his cars at the Y, the gateway to the City. Which was basically a junk yard. I met him once inquiring about buying his place. A cantankerous old gentleman…May he RIP.
Apparently he owned several properties and was very active in public affairs and politics. No heirs that we no of.

The reality is that we all get old and some of us will want out of the landlording business. Sure, that income stream may be necessary or nice for some folks, but not that important to us. I have pensions from several work situations in addition to SS if that lasts long enough. We have no kids. I have been in the landording business for nearly 30 years, pretty much right after college. Between doing that and working FT, I am tired. It is time for us to burn some cash on us. Seriously.

So while your idea is fine for some folks, I would rather simply alleviate myself of all owner risk immediately while getting favorable installment sales tax treatment. Now, if I got a healthy oh 10% or even 20% down payment in additiion to an interest only or fully amortized revenue stream as income, I can stomach that. Should buyer default, I believe I would have enough received to take it back and then redo it again or sell it in the normal fashion.

Welcome, Newbie! We could use some new blood here…


I would say that offering owner financing on a residential property where it is paid off or can be has its pros and cons. It can be a good option for sellers who want to attract a larger pool of buyers, receive regular income, and potentially spread out their tax liability. However, there is always a risk of buyer default and it may not provide the full lump sum of cash upfront. As with any financial decision, it is important to carefully consider the options.