Understanding Seller Financing

By: Benjamin DeBell

Seller financing simply means that the seller of the property is offering financing. This means that the buyer does not have to apply to a third party lender in order to buy the property. Sellers often offer seller financing because in a buyer's market, attracting qualified buyers is very hard.

With seller financing, sellers get paid for the property they are selling every month - until the debt is paid off. At the same time, the property secures the loan, so that there is less risk than many sellers assume. Many sellers also find that they can get a bigger return on their investment by both selling the home and offering financing - the seller makes money in selling the home but also through the interest paid on the loan. Sellers will often sell the cash flow note or the I.O.U to an investor. This ensures that investors get money for the property up front. Plus, in some places, the seller can enjoy a considerable tax benefit by offering financing.

Sellers are not the only ones who benefit from seller financing. Buyers who cannot qualify for a traditional loan often find that they can still buy a property by looking for real estate that comes with seller financing. Buyers can also often negotiate more with a seller than with a bank when working out the terms of a financing package. A seller can often afford to be more flexible with financing than a bank.

Also, if you are a buyer, understanding seller financing can help you. For example, if you understand that a seller can sell the cash flow note to an investor - so that the seller is no longer responsible for the loan - you can negotiate for better terms and lower monthly payments. After all, the seller can get all the money for the property from the investor up front. It is also important to remember that many sellers will not even consider your credit scores when offering you a loan. With seller financing, there is often no credit check. Therefore, if you have bad credit but your financial situation has recently improved and you can start making monthly payments on a home, seller financing might be right for you.

Real Estate
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 

» More on Real Estate
 



Share this article :
Click to see more related articles