Owner financing can be a great way to buy or sell real estate without having to pay cash or get bank financing. Owner financing, also called seller financing,
What is owner financing in real estate? Who has done it in India?
The correct term is vendor financing.
I have used this system personally for one of my clients. The client had bought the land with his own funds and could not get bank loan for prospective buyers as the project was in a rural area.
We launched the project nevertheless and those who couldn’t pay upfront, would pay via EMIs to the seller. There was a discount to those who paid upfront and that was the “cost of financing”. Others paid over 24 months and when all payments were done the property was registered in their name. Simple.
The thoeritical way is to register on receipt of down payment and get a mortgage in the name of the seller as security. The seller becomes the banker. But most sellers are vary of our legal system being efficient enough to enforce a mortgage recovery.
there also exists a version of owner finance where it’s most commonly used.
Have you heard of society owned layouts. You will find many projects owned by a group of people with common interests who form a society. The society buys the land, converts it and then sells to its members. So the members don’t have to pay upfront. They pay in monthly instalments. Technically they are investors but for practical purposes we can call this owner financing.
Hope this helps!!