Is Seller Financing Right for You?

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Just the other day I had to assist a seller with some seller financing. It’s not all that common, and that’s why I think it’s important for you to know about. Seller financing can be a useful tool because it allows sellers to move a home faster and get a sizable return on the investment. Buyers may benefit from less stringent qualifying and down payment requirements, more flexible rates, and better loan terms on a home that otherwise might be out of reach.

Before I begin, I’d like to preface this information by telling you that you’ll likely need a lawyer if you wish to obtain seller financing. This is not something that I can do, and it’s not something you want to do on your own.

From a seller’s perspective, you need the buyer to put enough money down to protect yourself. You don’t want 100% financing, but you do need enough skin in the game so that the buyer doesn’t walk away. If the buyer does walk away and you have to foreclose, then you do have some reserves to fix the property if you need to. Most of the time you’ll be looking at 30% to 60% down.

One caveat to this strategy is that you cannot have a mortgage and do seller financing. However, if you agree to a 6% rate on a $200,000 home, you would end up pocketing roughly $12,000 per year. That’s nothing to shake your head at.

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You’ll need the help of an 
attorney to pursue owner financing.

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But on the flip side, how should buyers walk into a situation like this? You should prepare to put a very sizable down payment on the home. Sellers are put in an awkward position if you cannot put at least 20% to 50% down. Using owner financing also narrows the amount of homes you can look to purchase, because you’ll need a home without a mortgage on it.

If you’re looking to do down this route, please don’t hesitate to contact me. You’ll need the help of a professional.

I look forward to hearing from you!