The Land Flipper on Owner Financing: How To Use Seller Financing to Accrue Real Estate Notes and Generate Passive Income by E.B. Farmer

Chapter One: Why OF is Great for the Buyer.
But First: What is Owner Financing?
Owner financing (OF) is pretty simple. It’s when the guy who sells you the
object or service takes his money over time (monthly) rather than as
lumpsum cash. Do you need some expensive mouthwork? Look around and
find a dental office which will let you pay them over time for all that rootcanaling

and crowning. Gotta have a new refrigerator? Yeah, you might
have to apply for a Sear’s credit card so you can keep your milk from
spoiling while you pay for the thing.
In the case of real estate (RE), the owner functions as both seller and lender,
and just like a bank, she won’t trust her buyer’s word on the loan but will
place a mortgage/lien on the property which she is selling. If the buyer
doesn’t pay as agreed, she’ll go through a process to recover the RE.
Foreclosure is a common name for that process. Repossession.
In virtually all cases of OF, the seller will get something extra from the
buyer for financing her item. It might be a higher price. It might be interest
on the unpaid balance. It might be both. As usual in capitalism, those
without capital (poor folks) have to pay more.
But don’t be mad at the seller. Money is time and time is money. She
deserves 1) her price and 2) whatever a third-party lender would make if the
buyer used them for the financing, rather than using the seller for it.
With RE, the owner-financing seller will generally make the buyer sign a
promissory note (an IOU secured by a mortgage or deed of trust) which will
spell out all the terms of the financing:
APR… or interest rate.
Term… or how long the loan is spread out or amortized.
Payments… by the week, the month, the quarter, etc. How much,
etc.
Default… including what triggers it, like failure to pay on time or
failure to cover the property with insurance, etc.
Due on Sale Clause… or whether a new buyer can assume the OF
loan.
And other terms.
Before we go on, let me advise again that you always use a lawyer with any
and every real estate transaction, but perhaps even moreso with ownerfinanced

deals. There may be some federal laws which are pertinent, along
with individual state laws, so let the professionals guide you.

The Land Flipper on Owner Financing: How To Use Seller Financing to Accrue Real Estate Notes and Generate Passive Income by E.B. Farmer