When it comes to financing real estate deals most deals follow the familiar process of obtaining a bank loan. But should traditional financing be unavailable or difficult to obtain, a buyer and seller may enter what is know as seller financing.
What is seller financing?
In plain English, the seller finances the house purchase for the buyer. It allows the buyer to pay the seller in installments rather than utilizing a more traditional mortgage from a bank, credit union or other financial sources.
Seller financing does several key things for the buyer:
1. helps the home buyer qualify for a different mortgage opportunity.
2. reduces the amount of "red tape" normally associated with traditional home purchase.
3. improves the profit margins on lending.
How does Seller Financing work?
The seller and buyer draw up a promissory note detailing the interest rate, schedule of payments, and the consequences should the buyer default on the obligation. Such documents should be drawn up by a real estate attorney to ensure the legality of the document. Other terms and conditions for the transaction can include: how long the financing will run, a balloon payment at the end of a designated term, and the down payment.
While not all sellers might be interested in seller financing, it provides a means of purchase that should be explored.
No comments:
Post a Comment