One of the most misunderstood topics in real estate is “Seller Financing.” This is probably because the topic of seller financing is often discussed from the buyer’s perspective. And in most cases, the buyer is a beginning investor who is trying to get a “good deal” or is starting to buy a property “without a down payment”. But all too often the deal falls apart and stories about seller financing problems break out.
It’s time to reveal the power of seller financing and the simple secrets and techniques to make the transaction a positive experience for everyone. While most people can explain the benefits of seller financing to a buyer, what most people don’t understand is that seller financing is actually better for the seller than it is for the buyer. Here are several ways the seller can benefit from offering seller financing on their property:
one.Moment – The seller has full control over the time of sale when offering financing. The seller can determine how long it will take before the sale closes. The seller can determine how long you can stay in the home after the sale closes. The seller can determine exactly how long the buyer must pay off the mortgage and when to refinance and repay the loan. And by offering seller financing, they can sell their home more quickly because of the attractiveness of seller financing to the broader market.
two.Highest selling price – Market value is based on “supply and demand”. Most sellers do not offer seller financing, so there is a limited supply but a high demand. As a result, the home’s price is higher than comparable homes in the neighborhood. Plus, because traditional mortgage costs are no longer in the equation, you can also collect that money (up to 3-5% of the home’s value) as part of the sales price.
3.Cash at closing – There is nothing that says that a seller must finance the entire purchase price of the property. The seller may require a down payment that will provide some cash at closing. (There are more advanced ways to collect cash at closing that go far beyond a down payment, but can still result in a “zero” for the buyer.)
Four.Payments over time – When the seller finances the equity in your property, those payments become a constant stream of income for the seller. This makes for a fantastic income stream for someone who may be downsizing or doesn’t want their property for whatever reason (this is especially good for investment properties).
5.High return on investment – Considering the principal as an investment, the payments received from seller financing are better than what one can expect from a savings account, CD or mutual fund. Even if the interest rate on the seller’s financing mortgage is small, the principal balance on the investment is higher than what the seller could have received through a traditional sale.
6.Difficult properties sell easily – Sellers who have properties that are difficult to sell can sell with seller financing. Again, the demand for any property increases as more people are qualified to buy it.
7.collateralization – The seller controls the terms of the mortgage and may require additional collateral to secure the loan. This additional guarantee can come in many forms. Of course, the seller can demand a large down payment. However, some other options include additional cosigners on the loan or equity in a second property. If the buyer owns another home or if an investor owns additional property, the seller can attach their seller’s financing note to the other property. This will make it more painful for the buyer to default because the seller can claim the additional property in the event of foreclosure.
When selling a property, it is the owner who is in control of the entire transaction when offering financing to the seller. The seller controls all aspects of the sale, including timing, price, terms, return on investment, and the safety and security of his estate. Since the salesperson has the flexibility to design a sale that meets all their needs, why sell it any other way?
How would you like to offer seller financing but eliminate all personal liability for the property after the sale? How would you like to increase your income from your rental property and get rid of ALL property management? How would you like to be paid double what your property is worth? How would you like to sell your investment property and never pay capital gains taxes? Look out for some practical examples of seller financing tips and techniques that will keep you out of trouble when selling your property.