Owner financing is in the front lines again and gaining tremendous momentum after the latest bust in the real estate market and a complete meltdown in mortgage lending. The concept of seller providing financing has been around for years, but was pushed to the back burner in the 90's due to declining mortgage interest rates and relaxing mortgage lending standards, until now. New online services are allowing sellers offering financing to connect with buyers.

Owner financing is gaining popularity again these days for several reasons. For sellers, offering financing attracts more potential buyers and helps them sell even in lagging markets across the country. With the recent unfavorable changes in the mortgage industry, sellers are able to, once again, offer competitive rates and loan terms when offering seller financing.

For buyers, borrowing from the seller instead of a bank can mean additional savings, because most sellers do not charge for origination, loan processing, appraisal, and many other fees typically present on a bank's Good Faith Estimate. Sellers do not have any overhead and, therefore, do not have to "feed" loan officers, loan originators, and the host of a page-long list of employees involved in the processing of a typical bank mortgage loan. In addition, buyers with low credit scores, who are disqualified with traditional lenders, may especially be interested in seller financed properties since this option may be the only way for them to finance a property with reasonable terms. Closing a privately financed loan will also require less time than a banking industry standard 30-day period, therefore, owner financing can save time and money for both parties. Seller and buyer can create, together with the help of a real estate attorney, a contract with terms that suit both parties. Seller financing gives buyers additional significant advantages when purchasing unusual real estate, such as raw land, commercial, or multifamily properties. Flexibility and ease of working directly with seller, who is also a lender, allows for direct negotiation of loan term, payment schedule, interest rate, and down payment. Try this with a bank. Only a handful of traditional lenders will underwrite a mortgage on a non-standard property, such as undeveloped land. Therefore, seller financing is a big plus for buyers who wish to purchase real estate with creative terms.

Sellers also benefit in many ways when offering financing. Getting the property sold in a lagging market is the obvious one. In addition, the seller may get a better price. Receiving principal plus interest payments gives the seller an additional source of income. Where else is it possible to earn 8 to 15 percent interest on assets without taking a great risk since the loan is backed by the property? The key to reducing the risk is, and always was, receiving a larger down payment from the buyer, which serves as the collateral. As an additional benefit, sellers of undeveloped land, commercial, and multifamily real estate have higher chances of getting the property off their hands by offering owner financing. Lower closing costs and more flexibility on the terms of the contract are important factors as well, but deferred and reduced capital gains tax is by far the biggest advantage.

Capital gain taxes are especially important for sellers who are in the higher tax brackets. Selling the property and carrying a loan will result in net capital gain being spread over the number of years of the loan term. The seller will then stay in the lower tax bracket for the year of the sale. Selling for cash and receiving the profit (assuming there is one) in a lump sum would result in a higher tax burden as the capital gains would spill into a higher tax bracket in the year of the sale. As an additional benefit, the money stays in the loop and continues to earn interest for the life of the loan. Everyone is advised to always seek professional tax advise from an accountant who would determine the best scenario for any particular transaction, but spreading the income evenly and deferring taxes is almost always in taxpayers' favor.

And what if seller no longer wishes to service the loan a few years down the road? Well, there is always an option of selling the mortgage note to investors specializing in buying notes. Note brokerage is a big business and most quality mortgage notes can be sold on a secondary market at a discount.

Considering the slow real estate market at the moment owner financing is the perfect alternative and incentive for both, buyers and sellers. A big hurdle has been so far to find a listing service specifically for owner financed real estate. Most real estate listing websites have multitudes of ads with no way of separating or searching for owner financed real estate. Craigslist has many ads with seller financing, although searching for specific financing terms is not possible. This problem has been recently resolved by a new innovative online service www.SellFinanced.com. SellFinanced.com specializes only in seller financed and lease option properties. Buyers can search for homes, land, commercial, multifamily and even small businesses by location, down payment, monthly payment, monthly rent-to-own payment, and price. There are currently hundreds of listings in all states. The services are free for buyers, while owners, sellers, and agents can list for a nominal fee starting from only $9 per year. http://SellFinanced.com offers listing upgrades, some of which include guaranteed traffic to a specific listing. SellFinanced.com also provides additional paid bulk listing services for real estate and note brokers.

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