Owner financed offers on my listings

[Dustin Lunceford]

I have had a good bit of investment property listed over the last year.  I have recently received calls/verbal offers on a few of my properties that have me scratching my head.  Each of these offers has been $20,000-30,000 over the asking price with owner financing.  I have asked if someone is teaching this offer structure and one person said it's common in land and the other explained it as a win-win situation.  I asked questions of the win-win buyer and after a little back and forth, it seemed like the buyer is just overpaying for the property to get owner financing.  My two question are:

Have other agents had similar type offers on any listings? 
What am I missing that makes this a desireable offer structure?

[Jason Taken]

The big thing here is not involving a bank but rather making you the bank. If the buyer's strategy is to hold long term, and they are getting favorable interest or payment terms, and the value supports, offering more than ask isn't necessarily a bad thing for them.

[Joshua VanName]

It is used mostly for land, so more common in rural areas. It is also more common in less expensive areas.   I have purchased land/structures using owner financing on multiple occasions.  In each scenario I could have obtained conventional financing but chose against.  It is common to offer above asking price to sweeten the pot as many owners would simply rather collect the cash upfront.

What makes it a desirable offer structure?

For the Buyer - In most cases the buyer cannot obtain conventional financing. In my case I wanted to keep the properties off the grid to avoid messing with my DTI ratio.

For the Seller - I can only think of a few reasons a seller would prefer this route.  There could be tax benefits in waiting a few years for the bulk of the money. For example if one was close to retirement they may find themselves in a much lower tax bracket. 

Banks may be unwilling to finance.  Maybe the property is priced above actual value or it sits on a toxic waste site.

In most cases there are no inspections done on owner financed properties.  This could be beneficial if the property is distressed or has issues.

Usually the seller can ask for a higher than market interest rate.

And the last reason is it increases your potential market. 

From my experience I would avoid it as a seller unless I was getting a large down payment, a larger purchase price, or a higher than market interest rate.  Or a combination of all three.

[Dustin Lunceford]

@Jason Taken Thanks!  I'm familiar with owner financing and the benefits.  These purchase prices offered are not supported by the value of the properties.  I would expect all of these properties to appraisal close to the asking price.  

[Dustin Lunceford]

@Joshua VanName Thanks!  I'm familiar with owner financing.  When offer on off market properties, I usually include a cash prices and financed prices.  The part that is most confusing is the offer price.  I get that offering over is sweetening the deal for the seller.  On the land deals are you paying interest?  

Also, the listings I have received these offers on are all in a good part of town, priced competitively with comps or a completed appraisal, and either recently renovated or not needing much updating.  Targeting distressed properties and making creative offers makes total sense.  If there was room to increase the value after purchase, then I would understand the approach.  I am confused by the idea of paying 10% over the value of a property just because it is an owner financed deal.