We have been brokering and investing in real estate for a long
time. Long enough that we could measure by cycles rather than
years. There have been several cycles in which the traditional
lenders were so flummoxed by economic or regulatory
conditions that owner financing (also known as "creative
financing") was necessary for the real estate market to fully
Please know that our experience is centered around small town
Ohio. For the most part, real estate markets are local. It is
sometimes a mistake to extrapolate a local experience into "the
way it is". We are just not big city types and never had any
desire to be Californians, where seller financing has long been
part of the charm of owning real estate. So...your experience
From 2000 to 2007, owner financing was pretty much a
memory. Banks and mortgage brokers were so eager to lend
all the money you could possibly need and at such historically
low rates, that they crowded the sellers out of the lending
market. Not that sellers were complaining, mind you.
Owner financing, at least in our market, usually takes the form
of a second mortgage. The buyer gets a traditional mortgage
from a savings & loan or bank for 50%-70% of the purchase
price, adds some cash, and the seller holds a note for the
When we first started investing in the early 1980's, cash for
down payments was mostly a theoretical thing, so owner
financing was imperative for us to be able to buy. It worked for
One might have expected a surge in owner financed deals in
2008. If it happened, I am not aware of it. Perhaps the
shock of the popping bubble had to wear off first. Now that
we have all had time to acclimate to the way things are, I
suspect that owner financing is becoming more prevalent.
Exhibit A in that suspicion is the Creative Financing Journal
brochure that crossed my desk last week. Someone named
Michelle Rivers sent it to us. She is in the business of buying
the notes created by owner financing. Her web site is here.
We have bought and sold a few notes, although not for a
long time. It is an interesting and potentially profitable
business requiring some specific expertise. But for the
business of buying and selling notes to work, there needs
to be a surge of owner financing to create those notes.
We would consider the return of owner financing to be a
good thing. It means that the real estate community is
getting creative- which is always fun, and it means that
some buyers and sellers are starting to agree on what real
estate is worth.
It has to be a good sign.