Should you offer owner financing?

Offering to carry a loan for a buyer can be a good deal.  It can allow you to defer paying taxes on any capital gain you make when you sell the property.  It can also help a marginal buyer afford your house. 

Sellers who offer financing normally carry second loans on the property.  They're called "seconds" since they are subordinate to the primary or first loans they buyers plan to get from a lender.  Second loans are riskier than first loans--if the buyer defaults on the first loan and the lender forecloses, all subordinate loans are wiped out. 

There are some disadvantages to doing this:

  • If the borrower defaults, you'd need to buy out the holder of the first loan at the foreclosure auction to protect your interest. 

  • If you try to sell your second loan to a third party, you probably won't get much for it.

  • A nasty borrower can sometimes delay a foreclosure on a owner-financed second with various legal maneuvers.  For example, the borrower could claim that you made misrepresentations about the property.  Until these legal tricks are exhausted, you'd essentially be providing the borrower with free rent. 

These problems become less serious if the borrower is making a large down payment and if you trust the borrower.

If you decide to offer owner financing, you'll want to tell prospective buyers about it or in your flyers and ads.  Say something like "owner will carry" or "owner financing available."  Don't specify the terms of the loan, since that may trigger reporting requirements under the Truth in Lending Act.

Should you offer a home warranty?

Most homes for sale now come with home warranties, which usually cover much of the cost of repairing or replacing a home's major appliances and operating systems for a year after the house sells.  A warranty normally costs between $200 and $500, and it's an especially good deal if some of your home's appliances and systems are likely to fail soon.  If you offer a home warranty, tell prospective buyers about it in your flyers.  You can also display "Home Warranty" sign riders.


In general, buyers expect anything that's permanently attached to the house to stay with it after the sale.  If you want to take things like draperies, light fixtures, or built-in appliances with you, make a list of these exclusions and make sure prospective buyers know about them before they have a chance to make offers.  I think it's a good idea to list all exclusions in your flyers. 

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ŠLori Alden, 2008.  All rights reserved.