4 thoughts on “What advantage does the seller have in "seller financing" of a home property?”
This is not so much an advantage but a last ditch effort to sell their house. A bank will not loan the buyer any money so in these cases the seller becomes the lender and says pay me the purchase price over several years.
In fact I would suggest the seller is at a disadvantage here many times because they are financing a person with severe credit problems. Anyone with average credit will typically borrow from a bank.
The advantage is the buyer is now responsible for real estate taxes, repairs, etc… The disadvantage is buyer is often times a poor credit risk and seller will have to foreclose eventually because this buyer will eventually fall behind on payments.
The seller can also be at an advantage if buyer is not informed. for example they could charge an extremely high interest rate such as 9-10%. An uneducated or uninformed buyer with poor credit may agree to pay that rate not understanding the huge premium they just agreed to.
The seller is guaranteed that the buyer has financing. Beyond that there isn’t any. The possible negatives outweigh the positives so much that I would think that any seller would be crazy to provide their own financing.
You get to be the bank. You charge interest and make that money, but also assume the risk that the buyer won’t pay. Then you have to go thru the time and expense of repossession.
Be very sure you do everything properly. use a real estate attorney and document everything. This is no time for a handshake deal or do-it-yourself contract.
This is not so much an advantage but a last ditch effort to sell their house. A bank will not loan the buyer any money so in these cases the seller becomes the lender and says pay me the purchase price over several years.
In fact I would suggest the seller is at a disadvantage here many times because they are financing a person with severe credit problems. Anyone with average credit will typically borrow from a bank.
The advantage is the buyer is now responsible for real estate taxes, repairs, etc… The disadvantage is buyer is often times a poor credit risk and seller will have to foreclose eventually because this buyer will eventually fall behind on payments.
The seller can also be at an advantage if buyer is not informed. for example they could charge an extremely high interest rate such as 9-10%. An uneducated or uninformed buyer with poor credit may agree to pay that rate not understanding the huge premium they just agreed to.
They get to collect the interest and can foreclose if the buyer doesn’t pay. The drawback is they don’t get all their money up front.
The seller is guaranteed that the buyer has financing. Beyond that there isn’t any. The possible negatives outweigh the positives so much that I would think that any seller would be crazy to provide their own financing.
You get to be the bank. You charge interest and make that money, but also assume the risk that the buyer won’t pay. Then you have to go thru the time and expense of repossession.
Be very sure you do everything properly. use a real estate attorney and document everything. This is no time for a handshake deal or do-it-yourself contract.