Owner Financing

Owner Financing is when the seller of the property will accept payments over time instead of a payment in full.

As Real Estate Investors who often are trying to conserve cash, Owner Financing is often attractive when looking to buy.

As Real Estate Investors looking to get the best return on their investment, offering Owner Financing when selling a property is often very attractive.

Owner Financing in its strictest definition is when a seller is willing to accept payments for equity, but a looser definition could also include the willingness of a seller to allow you to make payments on their existing financing. For example, when buying a property Subject To, a buyer will agree to purchase the property and make payments on an existing loan. If the seller has money due to them in this case, they may accept payments on that money or wait until the buyer ultimately sells the property to pay the seller the equity they are due.

Another loose interpretation of Owner Financing could be when a seller is willing to accept a Lease Option or Lease Purchase arrangement (especially when the seller applies all or part of the lease payment toward the ultimate purchase of the property).

If you are planning on getting Owner Financing on a property that you are buying, you may want to also read through the Recommended Loan To Values For Owner Financing Loans for what I personally recommend regarding Loan To Value on properties where you are getting the seller to carry back.

If you are going to setup Owner Financing you may also want to insist on getting a Substitution Of Collateral clause added to the agreement so that you can move the financing to another property.

Number of Properties Offering Owner Financing by City and Year

The following shows the number of listings (properties for sale) in the MLS that came up for sale on the MLS by year that have listed that they would consider Owner Financing. It does not mean that they all did Owner Financing.

City200920102011201220132014201520162017201820192020
Berthoud477531110000
Evans211124170100
Fort Collins29412017151161512830
Greeley1914139103451530
Longmont2642232886776530
Loveland2315131084325330
Severance023301000000
Timnath000000000000
Wellington021120002110
Windsor653321264110

*Current year is year-to-date.

Percent of Properties Offering Owner Financing by City and Year

The following shows the percentage of listings (properties for sale) in the MLS that came up for sale on the MLS by year that have listed that they would consider Owner Financing divided by the total number of listings. It does not mean that they all did Owner Financing.

City201520162017201820192020*
Berthoud0.44%0.38%0.00%0.00%0.00%%
Evans0.22%1.63%0.00%0.30%0.00%%
Fort Collins0.16%0.43%0.31%0.22%0.10%%
Greeley0.16%0.21%0.05%0.24%0.26%%
Longmont0.33%0.35%0.27%0.25%0.25%%
Loveland0.13%0.09%0.23%0.14%0.24%%
Severance0.00%0.00%0.00%0.00%0.00%%
Timnath0.00%0.00%0.00%0.00%0.00%%
Wellington0.00%0.00%0.51%0.30%0.38%%
Windsor0.23%0.54%0.32%0.09%0.12%%

*Current year is year-to-date.

References

This is usually referenced from:

See also…

  • James, Interesting statistics. You always generate good info. The thought crossed my mind when it was all MLS statistics is that realtors generally prefer bank loans and discourage owner financing. Perhaps a statistic of percent of homes sold using owner financing versus bank financing could be more encouraging to investors. Maybe not.
    Hope all is well. We are in Texas for the summer. Plenty of lakes to swim in, beautiful spring temps, and birds migrating from South America. Bob.

    • Yes, thanks Bob. I don’t think the number of owner financing homes that actually closed would be much more encouraging. I looked at that data in the past when looking up private lenders and it was a very small number there as well.

  • James, I agree with Bob that these are very interesting stats. Thank you for posting this. Since you included the lease option as owner financing, my thinking is that there are probably more of those transactions than what you have listed from the MLS. I agree that statistically it is still a small number. I also believe that the readers of this post would have a significant share of all of them. And, as we know, to get them all the way to closing is an even smaller number. My 2 cents.

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