Previously I explained how the rent to own option works when buying real estate in East Idaho.  This post will explain what an Owner Contract is and why it is something that both Buyers and Sellers should consider when buying Real Estate.

An Owner contract is simply where the owner of a property acts as a bank and carries the contract on a property.  Typically you set up the payment plan through an escrow company where the payments are made and disbursed.  The owner contract which is also referred to as an owner carry-back can benefit the buyer in the following ways:

Buyer can't get conventional mortage. With the real estate struggling in many areas of the country many people have had their credit hurt by a foreclosure or short sale and cannot qualify for a conventional mortgage.  As long as the Buyer has a current job, the owner carry option can be a great alternative while rebuilding credit.

Lower down payment options.  Many conventional lenders require 20% in order to receive the best terms.  In the Owner contract situation many times the buyer can negotiate a 10% down payment or even less is some circumstances. 

Less Hassle for Approval.  I still recommend using an attorney to draft some of the documents but this is not a requirement.  Because you are not dealing with large financial institutions you typically do not have to go through an approval process that is extensive.  Your closing costs are typically a lot less when doing an owner carry because you are not paying for origination fees and other expenses associated with getting a loan, appraisals are recommended but not a requirement.

What are the benefits for the owner on a Owner Carry Back?

Open the door to more buyers.  By offering the option of a Owner carry, Sellers will open the door to a larger pool of Buyers.  This can be a positive advantage in a very competitive real estate market.

Residual Income.  If Sellers are in a position where they do not need the full equity out of their property then the Owner Carry back is a great option.  You can still enjoy the monthly income steam.  The other benefit of setting up an owner carry instead of just renting the property is not dealing with landlord issues, the owner is responsible for paying taxes, fixing anything that is broken and paying the homeowners insurance.