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What are the benefits of seller financing?
Seller financing is when the
person who is selling the home to the buyer helps the prospective buyer to
finance a real estate transaction without the buyer having to obtain a loan
from a bank or loan company. Normally this is done because the buyer cannot afford
to finance the deal and has been unable to attain a loan from a loan company or
from their bank.
Whilst the obvious benefit
lies in the fact that the home seller is able to sell their home via this
route, which may not have been possible, had they not agreed to finance the
buyer through seller financing, there are also other benefits that can be
gained from seller financing of the buyer.
A seller can finance the
buyer by one of two ways: taking back a second note or financing the entire
purchase.
Seller financing can offer
the seller of the property tax breaks, as well as allowing the buyer an
alternative form of financing after not being able to qualify for a usual loan.
Whilst the tax breaks are
great for the seller, they are in effect acting as a bank or loan company
manager when they take out the agreement to purchase the property for the
buyer. With this responsibility comes risk, and these are the same risks as
those facing any lender: I
No matter who the buyer is,
you should always ask yourself the following questions.
Is the borrower is a good credit risk or a bad
one?
Will the property hold enough value over time to
allow for the repayment of all loans made against it?
To find out the answers to, or supplement what is already know, you should
always run a full credit check on the buyer (borrower). Financing, disclosure
and repayment-term requirements also need to be finalized and it is intelligent
to consult an attorney.
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