There are few things that are a win-win situation that are as beneficial as seller financing. Both the buyer and the seller stand to benefit when they can come to agreeable terms and have taken the proper steps to understand their rights and responsibilities. The closing goes a bit differently, but with the assistance of a professional, seller financing closing can go quite smoothly. Here are the buyer and seller benefits of seller financing.
Buyer Benefits of Seller Financing
- Overcome inability to get traditional financing
- Have better terms than might be possible with traditional financing
- Enjoy lower closing costs
- Ability to negotiate a lower down payment
Seller Benefits of Seller Financing
- Create an income flow
- Spread out the gain over several years and thus the taxes, if applicable
- Earn a higher interest rate than traditional savings accounts and other investments
- Be able to sell a distressed property
- Reduce certain closing costs
- Can take back the property if the buyer defaults
There are different ways to go about seller financing, including a lease option, “subject to” purchase, balloon payment mortgage, or installment contract. While there are disadvantages and risks involved with seller financing, there are many situations where it makes a lot of sense. The majority of risks can be minimized with proper counsel to handle the legalities of the transaction. It is wise to enter into a seller financing situation with full understanding of the process so that the closing can be achieved with both sides happy about the outcome.
