Is selling your home yourself a good idea?

Karen Staake is desperate to sell her home. Her finances are more than a little tight after a rough couple of years. The trouble is Staake says real estate has not been moving and banks are not lending. So, she decided to get creative and finance the sale herself.

"If people cannot get loans from the lenders, they're going to need to get it from the owners," said Staake.

It's called "owner financing" or "owner will carry." Real estate experts say the strategy was popular more than 20 years ago and is making a comeback in today's market.

"It makes them stand out above all the other listings because it is much easier for that buyer to get into that house now," said Jonathan Nicholas, President, Council of Real Estate Brokerage Managers.

The seller has many options including financing the entire sale.

"Many, many times you'll see a mortgage for 80 percent from a traditional lender ... and the resulting 20 percent or the balance of that note can be picked up by the seller," said Nicholas.

The seller and buyer agree to the terms including the amount and length of the loan; along with the interest rate.

Staake is looking for a buyer to make a 15 percent down payment and is offering an 8 to 8.5 percent rate. But, she is willing to be flexible.

The most common way to undergo owner financing is to have a closing just as if you went through a bank. However, in this case, the seller is the lender. There are typically attorneys representing both sides and the deed is signed over to the buyer.

"The seller is coming to the table and saying, 'I'll finance on a monthly note - or mortgage - until such times that buyer can attain some alternative financing,'" said Nicholas.

The deals are typically short-term, which could be up to three to five years. Staake holds a mortgage on her property, so she will pay the bank with the money she gets from the buyer.

But consumer advocates warn the concept is not for everyone.

"The seller needs to be sure that the flexible financing works for him or her. Are they someone who doesn't really need this lump sum up front?" said Ruth Susswein, Consumer Action.

There are real risks, so the contract is the key.

"Make sure that you're both protected and that if there was any problem with the loan, that it be very clear as to what is default. If the buyer does not pay over a period of time, when is the buyer considered in default ... And when can the seller take action," said Susswein.

"Then as well, you might look at involving an escrow company or a title company to play intermediary to take those payments for you on your behalf," said Nicholas.

Staake is well aware of the risks, but believes the country can revive real estate and the economy through owner financing.

Consumer advocates say sellers should do their homework and check out a buyer's credit report before signing a deal. They may also want to consider having buyers sign a "quit claim deed." If buyers don't make payments within an agreed upon time, the deed is then released back to the seller so they can regain ownership of the property.



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