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Inhouse Financing versus Bank Financing

Discussion in 'Real Estate' started by ReadmeByAmy, Jan 16, 2016.

  1. ReadmeByAmy

    ReadmeByAmy Entrepreneur

    If you will convince your buyer who is buying a house and lot from you what would you suggest with regards to their payment method to the real estate developer? Is it Inhouse Financing or Bank Financing? As a realtor which do you think is the best for your buyer? Or you just let your client to have their own decision depending on their needs?

  2. briannagodess

    briannagodess Entrepreneur

    I think the decision should be based on the client. I'm just there to give them facts about in-house financing and bank financing. But in the end, they still have the final decision on what payment method they will choose. As for me, if I will buy a house and lot, I would choose bank financing because it is more convenient and easy.
    ReadmeByAmy likes this.
  3. Digsby Trace

    Digsby Trace Entrepreneur

    Bank financing is convenient but it's very difficult to get a loan from the bank too now a days. The decision should be based on what's convenient for both of you actually but if you want your property to be bought immediately, then choose a method that is easier for the potential buyer to pay.
    ReadmeByAmy likes this.
  4. T J Tutor

    T J Tutor Administrator Entrepreneur

    In many states, like mine (NY), Realtors are not allowed to pitch financing. However, we can make recommendations and we have to offer at least three when doing so. We can make our opinions known about the benefits and features of a lender, but nothing more than that.

    When it comes to selling a lot and a new home build for that lot, typically the lot is already owned by the developer. In either case, the financing will likely be done in a fashion that requires the finance institution to do a construction loan whereas the lot is paid for at the inception of the contract and would likely be interest only for the build period. At the end of this build period, the financing is then converted to a standard mortgage for the closing.
    ReadmeByAmy likes this.
  5. harryblossom0

    harryblossom0 Entrepreneur

    The Advantages of In-House Financing

    • It’s quite simple and straight forward since you will be dealing only with one company.
    • The document requirements may be minimal. Some will not even bother you with too much document details on your financial capabilities.
    • This may be the only option for people who for some reasons can’t get a loan from the bank or other financial institution.

    The Disadvantages of In-House Financing

    • The interest rate is way up higher than what the market offers, sometimes even double market figure.
    • The down payment could be bigger than would normally be required if you use bank Financing.
    • Only Short-Term Financing. The developer is wise enough to minimize the risk of having you as a client.
    • May be available only on property purchase with house that is still to be constructed. Some developers would not use In-House Financing on a house that is already finished and/or ready-to-occupy
  6. remnant

    remnant Entrepreneur

    Bank loans are not easy to come by what with the stringent requirements. I know of realtors who facilitate their customers to acquire bank loans. They arrange financing for their clients. Grace periods and payment issues are easier to negotiate. At the end of the day, inhouse financing is the winner. One strategy I would wish to be tested is for the buyer to pay a premium rent, say 50% above the normal rent with the extra amount being an instalment to purchase the house.

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