The Advantages of Owner Financed Property Contract While Buying a Land or Property

Owner financed property is an indispensable contract between the buyer and seller that allows the buyer to make payments to the seller for a home or property purchase. In this contract, the buyer gets to use the property but the seller hangs onto official title until paid in full. Over the last couple of years, the demand of owner financing land contract has increased a lot to the sellers and buyers.

It is true that the contract comes under different popular names including real estate contract, contract for deed, installment sale properties and land contract etc. This is an alternative way to document the seller financing the agreement from the more common note and mortgage or note and deed of the trust.

The most important consideration with an owner financed property is that the buyer will not received the warranty deed to the property until the purchase price is paid in full. Of course, it means the seller stays in control as official title holder while the buyer makes the payments. So think of the contract is like a layaway program for the deed.

With a deed of trust or mortgage the seller provides a deed to the buyer at closing, transferring title to the buyer. Then the buyer simultaneously gives back a purchase money mortgage to the seller for the portion financed. When the amount financed is paid in full then the lien is simply satisfied.

The buyer also risks the seller encumbering or clouding title before the contract is paid and the deed released. To provide a greater protection, the fulfillment warranty deed can be held in trust by a third party escrow servicing agent.

Furthermore, if the buyer quits payment and the seller needs to take back the property, the owner financed property contact has the advantage of being faster and less expensive than a drawn out foreclosure process on a mortgage or deed of trust.