Let me tell you my true and real story. It was early 2012 I had just moved to ND to start my own Real Estate business and was living in a camper at the time because rents in Dickinson ND were so high at the time. I have heard and studies the concept of “rent to own” “contract sale” "land contract” "owner financing” which in essence are all pretty much the same. Winter was approaching and I was pretty certain I did not want to spend the harsh winter of ND in a camper even though its “doable”.
As I was “hitting the pavement” I met this guy, Blaine, that later became one of my mentors. Blaine told me he know of this guy, Jeff, that has a house and might be interested in selling it so Blaine took me to the house and showed it to me. Let me tell you it was ROUGH and I have the pictures to prove it. It needed work. It was so bad that Blaine told me “you better not show this house to Caroline (girlfriend at the time, wife now) until you are finished with the remodel”.
so getting it financed through the bank would have been hard as banks have certain “condition” requirements for lending. they don’t want to lend on houses that are falling apart… or to people that don’t have a job or income, none of which I had at the time.
knowing that my time was limited as winter was approaching fast, I wanted to secure a house, and having the basic knowledge I had at the time on owner financing I made an offer to Jeff. I offered him a nice size downpayment and asked him to finance the rest at reasonable interest rate for a term of 5 years. Jeff Agreed.
So we signed general terms and I took the document to a local attorney to draw up the paperwork for the transaction.
So here it is owner financing contract sale is an agreement between a buyer and a seller where the buyer puts a downpayment and the balance is carried “financed” by the seller under certain terms. Its a much easier, quicker and seamless process compared to obtaining financing from a financial institution.
In the event the buyer defaults (does not make payments) the seller gets the property back, the buyer loses its downpayment and any equity (appreciation in price) it gained (or lost) during that the terms of the sale.
People, this is a great way to buy a property without needing to have perfect credit, good relations with the bank and all the hassles that come with traditional financing.