Owner financing or seller financing as the term goes, means that the seller arranges money for the buyer to purchase the property in part or whole depending upon the financial needs of the buyer. The seller will loan the buyer the money needed to purchase the property. This way the owner is able to sell the property quickly and at the same time the buyer need not worry about arranging for a loan. The advantages of owner financing are many. The utmost merit of the plan is tax advantages. The tax is spread out over a period of time, until which the owner receives the money from the sale of the house. The owner also is happy with the monthly instalment paid by the buyer, even after selling the property. The buyer takes care of the maintenance of the property and the owner need not worry about repair works.

The seller can charge interest for the money lend to the buyer. The title of the property remains with the seller until the financial transaction is complete. Monthly mortgage payment is collected from the buyer as well as interest on the money lend. The price of the property is increased with the mortgage payment and the interest amount. The sellers protect their interest by asking the buyers to make monthly payments in an escrow account that is held by a bank. The buyer also should place a Quit Claim Deed with clear directions to the bank to file for Quit Claim if the payment is delayed, returning the property to the seller immediately. This way the seller is secure from defaults and his property remains safe. The involvement of a third party can help safeguard the right of both the parties.

In case of a executing a Quit Claim deed the buyer loses the property and the money invested so far on the house. This is a powerful tool in the hands of the seller to force the buyer to make payments on time. The concept is simple, the owner arranges for a part loan for the buyer and the remaining amount can be arranged by the buyer from a bank or lending agency. Since the major portion of the loan is given by the seller himself only a small amount needs to be arranged by the buyer. In case the seller is capable of financing the whole property there is no need for the buyer to look for other loan options. Another major advantage of the deal is that the buyer can save thousands of dollars on closing cost. The seller at times charge the same interest rate as a bank and the buyer can end up paying lesser than the he pays to a bank.

This option is welcome by many home buyers who do not qualify for banking norms. The banks and lending agencies follow strict rules and regulations and people with poor credit scores, self employed individuals find it difficult to acquire a loan. It is for these people that owner financing scheme comes as a respite.