The Advantages of Owner Carry in Real Estates
- Date: 2007-04-24 - Word Count: 632
Share This!
These days, there are a number of ways one can pay for a home. Certainly, one shouldn't be limited to just conventional financing for both the buyer and seller.
For one, buying a home for sale under Owner Carry terms means the current property owner finances part or all of the sale, usually through a second mortgage, although sometimes the owner will carry the entire loan.
This arrangement is particularly beneficial for the seller because it makes for a swifter settlement with little or no problems. Naturally, every real estate seller will want the highest price and all cash. But sellers also want to pay the least amount of capital gains as possible, and this is where the owner carry or vendors finance becomes advantageous for him/her.
With flexible vendors finance terms, real estate sellers can insist on and receive the highest price for their properties. In some cases, their asking price can even exceed the normal market value for properties.
Of course, it's not always about high asking prices. What really matters for the seller is the most net cash from the deal. Often, the seller has to pay settlement costs, broker fees and the balance of the existing financing. In addition, there may be capital gains due as well. In many cases, the sale of a property through vendors finance terms rewards the seller with more future yield than any other source from which the cash proceeds were reinvested.
Another obvious advantage of owner carry terms for the seller is quick settlement. Most buyers don't readily qualify for home loans, which can delay real estate sales. With vendor finance, both parties are spared from the trouble of time-eaters like appraisal, underwriting, survey, etc, and thus deals are closed quicker. Sellers can take charge in selling their property on their own, without having to shell out real estate agent's fees.
Finally, with a owner carry/vendor finance sale, there is less tax involved. As the seller receives the full sales price in cash or as 1031 exchange proceeds in the case of an investment property sale, he or she only pays gains to the extent you receive payments each year.
The seller carries a tax basis in the note equal to its face value, and will only pay tax based on the interest received, not on repayment of principal, which means more tax savings.
Just as Owner Carry Sales has its advantages for the seller, buyers too get a sweet deal from such arrangements.
One of the major and obvious benefits is that the buyer is freed from the often-high costs associated with conventional loans. Conventional lenders can be cutthroat, charging thousands of dollars for needless services like conveyancing, underwriting, property appraisals, credit reports, title insurance, etc.
This makes Owner Carry or Installment Sale ideal for buyers who don't have sufficient income to prove and to qualify for a home loan. In particular, vendor finance comes to the rescue of buyers who have poor credit rating.
Even if buyers do find the ideal property for sale in the right price range they can afford, and even if they finally qualify for a loan, oftentimes the rate would still be huge. And nowadays, you would be hardpressed to find lenders willing to offer fixed interest rate loans to people with poor credit rating.
Indeed, a rent-to-buy home sale can even give the buyer a chance to salvage and improve their credit rating precisely because they have a home they can pay for punctually.
Finally, without unnecessary ceremonies in the way, buyers can settle and move into their new property within days since there is no third party lender holding up the transaction.
All in all, however which way you want to call it, whether owner carry or vendor finance, the arrangement is becoming popular in real estate sales nowadays. And it is empowering both seller and buyer.
For one, buying a home for sale under Owner Carry terms means the current property owner finances part or all of the sale, usually through a second mortgage, although sometimes the owner will carry the entire loan.
This arrangement is particularly beneficial for the seller because it makes for a swifter settlement with little or no problems. Naturally, every real estate seller will want the highest price and all cash. But sellers also want to pay the least amount of capital gains as possible, and this is where the owner carry or vendors finance becomes advantageous for him/her.
With flexible vendors finance terms, real estate sellers can insist on and receive the highest price for their properties. In some cases, their asking price can even exceed the normal market value for properties.
Of course, it's not always about high asking prices. What really matters for the seller is the most net cash from the deal. Often, the seller has to pay settlement costs, broker fees and the balance of the existing financing. In addition, there may be capital gains due as well. In many cases, the sale of a property through vendors finance terms rewards the seller with more future yield than any other source from which the cash proceeds were reinvested.
Another obvious advantage of owner carry terms for the seller is quick settlement. Most buyers don't readily qualify for home loans, which can delay real estate sales. With vendor finance, both parties are spared from the trouble of time-eaters like appraisal, underwriting, survey, etc, and thus deals are closed quicker. Sellers can take charge in selling their property on their own, without having to shell out real estate agent's fees.
Finally, with a owner carry/vendor finance sale, there is less tax involved. As the seller receives the full sales price in cash or as 1031 exchange proceeds in the case of an investment property sale, he or she only pays gains to the extent you receive payments each year.
The seller carries a tax basis in the note equal to its face value, and will only pay tax based on the interest received, not on repayment of principal, which means more tax savings.
Just as Owner Carry Sales has its advantages for the seller, buyers too get a sweet deal from such arrangements.
One of the major and obvious benefits is that the buyer is freed from the often-high costs associated with conventional loans. Conventional lenders can be cutthroat, charging thousands of dollars for needless services like conveyancing, underwriting, property appraisals, credit reports, title insurance, etc.
This makes Owner Carry or Installment Sale ideal for buyers who don't have sufficient income to prove and to qualify for a home loan. In particular, vendor finance comes to the rescue of buyers who have poor credit rating.
Even if buyers do find the ideal property for sale in the right price range they can afford, and even if they finally qualify for a loan, oftentimes the rate would still be huge. And nowadays, you would be hardpressed to find lenders willing to offer fixed interest rate loans to people with poor credit rating.
Indeed, a rent-to-buy home sale can even give the buyer a chance to salvage and improve their credit rating precisely because they have a home they can pay for punctually.
Finally, without unnecessary ceremonies in the way, buyers can settle and move into their new property within days since there is no third party lender holding up the transaction.
All in all, however which way you want to call it, whether owner carry or vendor finance, the arrangement is becoming popular in real estate sales nowadays. And it is empowering both seller and buyer.
Related Tags: commercial real estate, online real estate, online real estates, homes for sale, home for sale, apartment and house for rent, commercial real estates
Your Article Search Directory : Find in Articles
Recent articles in this category:
- 5 Reasons to Buy Jasper Real Estate
Jasper is a small town in North Georgia and it is growing rapidly. Since North Georgia Foreclosures - Ellijay Real Estate
Ellijay Georgia has always been known for it's outdoor activities and seasonal festivals. Downtown E - How to Deal With Blocked Drains
A blocked drain is an occurrence that happens eventually to all households. You may have experienced - The Benefits of Hiring a Plumbing Consultant
Your dream home may not always be brand new, with fresh paint and home essentials. There are certain - The Worst Mistake You Can Make When You Apply to Rent a Home
A whole new class of people has become renters and potential renters in America during the last thre - State of Individual Real Estate Markets
Everybody is well aware of the hit that the real estate market has taken over the past three years. - Thoughts on Avoiding the Landlord Trap
I've heard several people say they would never invest in a multifamily rental property because they - An Idea to Increase the Bottom Line of Your Investment Property
Are you pretty sure that you've already maximized the income coming from your property? If you've cl - Finding the Value of a Piece of Investment Real Estate
There is a lot of confusion about how much investment property is really worth. We'll look at three - Arkansas Land For Sale - Search Engine Optimization and Your Website
If you have Arkansas land for sale and are interested in advertising it on your website I have a few
Most viewed articles in this category:
- How High Did Home Prices Really Go
The U.S. Census Bureau released data on Tuesday that revealed where the nation's hottest markets wer - New Homeowners Tips for Household Safety
With so many items on their ¡°buying a home¡± checklist, few homeowners take into considerati - Truth About VA Foreclosures
Many people now days are finding themselves out of work and not being able to make the mortgage paym - Avoid Rookie Real Estate Investing Mistakes
When Robert Kiyosaki, author of the Rich Dad book series, bought his first property he was, of cours - Finding The Perfect Roommate On Craigslist
Craigslist, Roommates, and The Concerns Craigslist is "great" when it comes to looking for housing - The Forgotten Secret To Selling Property - Simple, Quick And Cheap
Why spend big dollars trying to get people to drive a long way to see your house, when your best pro - Get Amazing Results Selling Real Estate Online
This is the age of the internet. Why not take advantage of the widespread use of the internet to ad - Dallas Real Estate Information
In the United States, Dallas is considered as the second leading state according to the area. If any - The Largest Private Equity Indian Real Estate Deal
In the largest private equity deal won by the real estate sector, Morgan Stanley Real Estate has inv - Fractional Real Estate Ownership
Fractional ownership of vacation ski condos is growing in popularity. Park City Utah a popular ski t