Sell Your House - Finance It!

By: Nancy Gleason

Ever thought about seller financing? It does not always work out that a buyer will connect with a seller that can afford to offer seller financing, but there is always the chance that it is worth asking. There are even a couple of new web sites that will assist you in setting it all up.

However, there are risks involved with this sort of sale, even though they can also be very successful, so why would anyone want to become involved?

One of the deciding factors will be how badly you want to sell your home and how much mortgage is owing on it. It is fairly difficult for sellers to find prospective buyers at the moment and it is also difficult for buyers to find financing. This means that the financial climate is right for both parties to try and find a solution outside the norm. However, you will need a very low mortgage or, ideally, no mortgage at all, to be able to follow this route.

Often prospective buyers will go and look at a home that is offering seller financing whereas they may not normally bother to become involved with house-buying. Looking at a home that you may have the chance of buying is more encouraging than just viewing homes and hoping that you can get financing.

A prospective buyer will be more responsive to the pleasing aspects of a home that they feel they could actually own. They may have even given up looking if they are struggling to get financing, so the offer of seller financing could draw them back into the market.

If you are leaving the country or for whatever reason, you simply have to sell your house and do not need the lump sum of cash to pay off your own mortgage on the house, this could be one option that you could investigate. You will definitely need the help of a good real estate agent and a good lawyer, both of whom need to be experienced in seller financing.

There are many options that you can choose from if you are thinking of this solution. As the seller, you will be calling most of the shots; this is because you own the investment (property) and therefore you are taking most of the risk.

How much risk you take will depend on your choice of finance plan. The buyer can also negotiate certain aspects of the plan with you, for instance the type of plan, the number of years, the down payment and the interest rate, to name but a few.

It must be reiterated that you DO need to have experienced professional personnel on board in a deal like this. Having said that, here are a few of the options that you can draw up in a seller financed sale.

The buyer can give a legal Promissory Note and the seller will carry a mortgage for the sale price of the house. This is sometimes called an All Inclusive Trust Deed (AITD).

The buyer puts a down payment on the house, receives the deed and the seller will arrange to hold a mortgage on the remaining balance.

There is also a system that uses the lease option or lease purchase, also known more commonly as 'rent to own'. The most popular way of doing this is for the buyer to rent the home for a set period, during which time it may be agreed that some of the rental portion may be used against the future house purchase. Once the lease/purchase period is up, the buyer will have hopefully arranged a loan to buy off the rest of the property.

There is also the equitable title system of financing, where the buyer shares the title with you but the seller retains the deed. A contract is then put into place in which the buyer makes payments to the seller, at the end of the full pay out of the purchase price, he is given the deeds. The contract can be written up to allow the buyer to keep paying a monthly sum or to have the opportunity to pay down - or pay off - the mortgage.

All of these options mean that you will be receiving more cash for your home than the asking price. This is because whoever carries financing (in this case - you) will also be charging interest that is payable to them each month. In this respect you can find yourself 'better off' by becoming a private financier, as long as you and your lawyer draw up a contract that is water-tight. Get his opinion on the contract in writing by email or letter.

Water-tight means that if the new buyer reneges on the contract at any time, it reverts back to being your private property. You do not want to have a contract where you have to go to court to evict the unhappy new 'owner' and have to rely on a judge to make the decision of whether this is an appropriate action.

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