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Seller Financing

What is Seller Finance?

A seller finance sale is an agreement in which the seller agrees to sell the property to the buyer by structuring a loan that the buyer will pay off over time. This agreement is very similar to getting a loan from a mortgage lender, except the seller and buyer can create and negotiate their own terms including price, monthly payment, and loan length, among other possible terms. There is no bank involved in the transaction and therefore, the buyer , seller and property do not need to qualify for traditional lending requirements.

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Frequently Asked Questions

How does this benefit the seller?

  • The seller can potentially obtain higher offer price than a traditional offer. By accepting payments the seller can create passive income

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  • The seller can structure terms to fit their financial lifestyle and goals

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  • Can minimize capital gains taxes and spread out depreciation recapture over time

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  • The transaction can close quicker and without financing contingencies

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  • The property does not need to qualify for traditional financing and can sell in as-is condition

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  • No dealing with the banks, You become the bank

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I would like interest on my monthly payments, what is the rate that I can expect?

  • Ideally, we would not pay interest every month. The payments would change monthly, and it's much easier to take the interest and add it to the purchase price. If you need to see a separate fee for interest every month we cap out at 2%

What are the disadvantages of seller finance?

  • The seller does not receive the purchase price of their home in one lump sum

 

  • Does not work with 1031 exchanges.

 

  • Unless a short term is negotiated, an older seller may not see all of the equity from the sale in their lifetime. However, payments can go to the estate or heirs of the note






 

What happens if the buyer stops paying?

  • We use a Performance Deed or Deed in Lieu pre-signed and held at the title servicing company. The house is effectively transferred back in the seller's name if the buyer defaults over a 30 day period. The seller in this situation would inherit the property back and benefit from any and all loan paydown payments, improvements made to the property, and appreciation that the property has seen. The seller could then sell the property again for even more money if they didn’t want to keep it. Sellers who have done this have often mentioned to us that they hope we miss a payment.


 

What if something happens to the home?

  • The buyer is required to carry homeowners' insurance to protect the property, the seller is listed as an additionally insured party until the note is paid in full

  •  If something happens to the property, your interests are fully protected by the insurance policy

So who owns the home?

  • The buyer has full ownership of the home as in a traditional transaction, the seller will retain a primary lien on the home

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