In today’s age, myths run wild.
Bigfoot is real. Aliens are living among us. The Earth is flat.
Because of this, you may have heard seller financed homes only benefit those that cannot purchase a home using traditional bank loans.
But, the truth is owner financing can be for everyone — including the seller.
Why Offer Seller Financing? Why Accept a Seller-Financed Deal?
When a seller accepts monthly payments on their home directly from the buyer, that’s an owner financed deal. They have cut out the bank.
The seller benefits from a passive, monthly income (which they have the freedom to sell for a lump sum of cash at any point). Also, they attract a wider audience of buyers which means a shorter time on the market — a dream come true for any home seller.
The buyer benefits from skipping the approval process for a loan from the bank. Additionally, it’s a more personal relationship than dealing with a banking institution.
When done correctly and legally, seller financing is a fantastic option instead of traditional bank loans.
Seller Financing for Sellers
Everyone loves a large sum of cash at closing. But sometimes, seller financing your home becomes your best option.
Here are a few things and qualities that make seller financing an excellent opportunity for selling your home.
Ready and Available to Investigate Buyers
When you agree to ‘be the bank,’ you have to do the work of the bank. This includes researching and doing your due diligence on your potential buyer.
Don’t worry; this is not a very complicated process…just a few things to check out before you agree to the sale.
- What’s their credit history?
- Do they have a stable income?
- Can they afford the home?
It is essential you take the time and spend the energy researching and setting yourself (and your buyer) up for success. You will want to close through an attorney and use a title company experienced in seller financing documentation and any regulations. Also, work with an authorized servicer to collect the monthly payments including reserves for the taxes and insurance.
When Do You Need The Money?
Need the money immediately from this sale to purchase a home or property for yourself?
If so, Seller Financing isn’t right for you.
Instead of accepting a lump sum now, you agree to future monthly payments. So if you need the funds now, it is not the right time to make a seller-financed deal.
Hard-to-Finance Property
Not all homes are created equal. At least in the eyes of banks.
From mobile homes to large plots of land, sometimes it’s hard for potential buyers to get a loan. And if your property falls into one of those “hard-to-finance” categories, seller financing could be just the solution you were looking for.
Take out the middleman AND sell your home for the price you want.
Seller Financing for Buyers
Looking to purchase a home? Wondering if accepting a seller-financed deal is right for you?
It probably is.
Unlike sellers, buyers assume little to no risk when accepting a seller-financing deal. In fact, they are usually the ones looking for it. Why?
Low Credit Score or No Credit History
If all you hear from banks and traditional lenders are “no” or “not a chance,” seller financing looks like an excellent option for you.
Without the same stringent loan requirements, buyers with spotty credit history can still purchase a home without a large down payment.
However, you still need to make regular payments and take this deal seriously.
Just because a bank isn’t hounding you, there are always consequences for non-payments and defaulting on your loan.
The seller extending you financing can still foreclose and take back the property – the same as if you had defaulted on a bank loan.
So, is seller financing right for you?
Despite the myths, the answer is often, ‘yes.’
For buyers who assume no risks, owner-financed deals mean avoiding the bank’s red-tape and credit requirements.
For sellers, those who are ready to put in the energy researching and to set themselves up for success, seller financing is an excellent alternative to a traditional bank deal. Made even better by the fact that you always have the option to sell your note down the road if you would rather have a lump sum versus future payments.
Have questions about offering Seller Financing? Or are you interesting in selling your mortgage note for cash? Contact NoteFellow today!
