Someone told me about it but I don’t understand it. Why would I want to finance the house I’m selling? How do I do it? I just want to get my house sold and it’s tough right now.
4 thoughts on “What is seller financing? I'm selling my home. Is it something I should consider.?”
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Good answers so far. There is a big difference between seller financing and lease-purchase, though. In a lease purchase, the buyer does not own the house; the buyer leases it. Ownership transfers later at the time of purchase.
With seller financing, the buyer actually owns the property. The seller holds the note, but they are not renting it out. They have SOLD it.
While the previous comment that you want to consult a professional if you are new to the idea, there are good reasons for structuring your sale this way:
1. The seller assumes the role of the lender. The seller carries the note on the property, not a bank.
2. The buyer pays mortgage payments to the seller – not rent, but actual mortgage payments. Buyer owns the property!
3. Sellers can choose to lend to anyone, including people who traditionally have a hard time finding financing: Self-employed, past BK, low FICO, and no SSN!
4. Buyer wins by obtaining credit that would otherwise be challenging – or even impossible!
5. Seller wins by setting a higher interest rate or sales price to cover his risk.
6. Seller wins protection in the event of default by holding the note on the property.
7. Buyer wins by avoiding the complex underwriting process with a bank.
8. Seller financing creates a win/win for buyers and for sellers alike!
Bottom Line: Seller Financing Sells Homes!
Seller financing is the same as lease to own. Essentially they’d live there and pay you monthly until they pay off the purchase price of the home. People do this when the buyers don’t have good enough credit to get a mortgage and will do just about anything to buy the place at a higher price. Sellers do this because they’re desperate to move and can’t find any buyers who want to pay the listing price.
If you don’t understand it you are way over your head already.
Seller financing is just what it sounds like: the buyer doesn’t get a mortgage through a conventional lender, instead the seller is the mortgage holder.
There are some reasons why you would want to do this:
If the buyer has poor credit and cannot qualify for a mortgage (in that case you would certainly want a hefty down payment)
If you are able to offer very attractive rates, better than the bank can, which would make a buyer’s payment smaller than they would have with prevailing interest rates.
In order to do this, first take the time to educate yourself on holding mortgage paper.
Get some legal assistance to draw up the agreement.
On the underlying question: it is tough to sell your house.
The good news: if your house is in great condition and is priced lower than comparable homes in the area it WILL sell.
Buyers are smart: they want to see a house in turn key condition with no repairs needed.
The house should be clean and updated and well maintained.
The price should be lower than the exact same house in the neighborhood.
Does your house fit this criteria? If it does you will find a buyer.
Your Realtor should be able to explain all this to you as well as giving you a comparative market analysis enabling you to price to sell.
Don’t get stuck in what you "need" to sell the house for and don’t be a "I won’t budge on the price" seller.
Your house is worth what a buyer is willing to pay and not a penny more.
If you do happen to sell your house using seller financing, you aren’t stuck carrying the note for the entire term of the deal. I work with investors who will buy the note from you once it is recorded and you are receiving the payments. Get a good down payment, make sure they have a good credit score and that they are on time with the payments they make to you. You aren’t stuck… there is hope.