HomeBlogGeneralIs Owner Financing a Good Idea for the Buyer, and for You? Share on Like what you see? Share with a friend. Is Owner Financing a Good Idea for the Buyer, and for You? Chris Kirshenboim | August 9, 2020 Last updated August 11, 2026 Most people ask the question from one side of the table at a time. Is owner financing a good idea for the buyer in Imperial, MO? Usually yes, because it opens a door the bank has closed. Someone self-employed, someone rebuilding credit after a rough two years, someone who has the down payment but not the two years of W-2 history a lender wants to see: those buyers can often close on your house when no one else will lend to them. The harder question is what it does for you. When you carry the note, you are no longer just the seller. You are the lender too, and you stay in that role for as long as the note runs. That can be five years or thirty. Around Imperial and the rest of Jefferson County, we see it come up most often on older homes that need work, on rentals a landlord is tired of running, and on properties an out-of-state family inherited and does not want to manage. All three are situations where a traditional listing gets complicated. Owner financing is one answer to that. It is not the only one, and it is not automatically the better one. Is Owner Financing a Good Idea for the Buyer in Imperial, MO? How Owner Financing Actually Works Owner financing, sometimes called seller financing, is simpler than it sounds. You sell the house and the buyer signs a promissory note and a deed of trust in your favor instead of a bank's. The buyer pays you a down payment at closing, then a monthly payment for a set term at a set interest rate. Most of these notes are written short, with a balloon payment somewhere between year three and year seven, on the assumption that the buyer refinances into a normal mortgage before then. A title company still handles closing. The deed still records. You still get a settlement statement. The difference is where the monthly check comes from and who holds the risk if it stops arriving. Missouri is a deed-of-trust state, which means a foreclosure runs through a trustee rather than through the courts, and it moves faster here than in many states. That matters, because if the buyer stops paying, that process is the remedy you are relying on. Get a real estate attorney to write the owner financing paperwork. This is not the place for a template you found online, and the cost of doing it properly is small next to the balance you are carrying. Owner Financing Pros and Cons for the Seller The owner financing pros and cons are worth writing on one page before you decide. On the plus side: a wider pool of buyers, often a higher sale price than a cash offer, monthly income at an interest rate better than a savings account, and in many cases the ability to spread the capital gain across several tax years through installment reporting. Ask your CPA about that last one, because it depends on your basis and how the note is written. On the other side: your money is tied up in someone else's house for years. You do not get a lump sum you can put toward the next thing. If the roof fails in year two, the buyer owns the house and may or may not fix it. If they stop paying, you are the one filing the paperwork and taking the property back, usually in worse condition than when you sold it. And if you still owe on your own mortgage, most loans carry a due-on-sale clause your lender can enforce the moment the deed transfers. That single detail ends the conversation for a lot of Imperial owners before it starts. What Tends to Go Wrong Three things, mostly. The buyer's balloon comes due and no lender will refinance them, so you are back where you started with a house you thought you sold. The buyer stops paying in month fourteen, and now you are chasing payments on a property two hours from where you moved. Or the buyer stops paying the taxes and insurance, and you find out from the county rather than from them. None of that is a reason to rule owner financing out. It is a reason to build the financing carefully: a real down payment, an escrow for taxes and insurance, proof of coverage naming you, and a servicing company that collects the payment so you are not the one sending reminder texts. Vet the buyer the way a bank would. Pull credit, ask for income documentation, and be honest with yourself about whether you would lend this person the money if it were sitting in your account instead of in your house. When a Straight Cash Sale Is the Simpler Path Owner financing suits a seller who wants income and can wait. Seller financing also suits an owner who has no mortgage left, some patience, and no pressing use for the proceeds. If you are settling an estate with three siblings, moving a parent into care, or trying to close out a rental you have already spent two years managing badly, carrying a note for the next decade is usually the wrong shape for the problem. That is the point where a cash sale earns its keep. There is a fair offer, a closing date you pick, no repairs, no showings, and no relationship afterward. Chris and the team have been buying houses around St. Louis and Jefferson County since 2016, we are rated 4.9 across 368 Google reviews, we are BBB A+ accredited, and our office is in Webster Groves. You can see exactly how we buy houses before you talk to anyone, and if you would rather compare, get a listing opinion from an agent too. Whatever you decide, decide it on your own timeline. We buy houses in Imperial and across the county when the timing works for you, and not before. FAQs Frequently Asked Questions Can I offer owner financing if I still have a mortgage on the house? + Usually not without your lender's consent. Almost every mortgage carries a due-on-sale clause, which lets the lender demand the full balance once the deed transfers, so check the note before you offer terms. What down payment should I ask a buyer for? + Ten to twenty percent is common in Missouri, and more is better for you. The larger the buyer's own money in the deal, the less likely they walk away when something expensive breaks. How is the interest rate set on a seller-carried note? + You and the buyer agree on it, usually a point or two above prevailing mortgage rates because you are taking more risk. State and federal rules set a floor, so have an attorney confirm the rate you choose. Can I sell the note later if I need the cash? + Yes. Note buyers purchase seller-carried paper, though they buy at a discount to the balance. A well-documented note with a seasoned payment history sells for noticeably more than a thin one.
