What is Seller Financing, and Why Should I Use It?
Looking to sell your home quickly? Or purchase a home while your credit is in repair? Seller financing might be just the way to go!
Seller Financing is a process where the property owner also handles the mortgage process instead of a bank. This is a unique process that allows the buyer and seller to together handle financing agreements and negotiations on their own. It functions similarly to a traditional mortgage, but eliminates the standard rules and requirements of a bank and allows the buyer and seller to agree to whatever terms work for them.
So, what would be the point of choosing to use this financing option?
For buyers, no minimum downpayment is necessarily required, and provides home ownership access for those who are working on their credit. For low-income buyers, this also allows more access to other financing opportunities, and lower expenses with closing costs, alleviating some of the financial burden of purchasing the home. The agreement terms are more flexible as well, and buyers don’t have to pay PMI (private mortgage insurance) premiums. PMI protects the lender should the buyer fail to make their payments, and this piece is not necessary in seller financing. Essentially, with seller financing's lack of regulations, the terms of the loan are 100% flexible.
For sellers, advantages abound as well. Sellers can minimize closing costs by utilizing seller financing, and set themselves up for success through amortizing capital gains tax savings over time. Interest rates are negotiable on the loan due to the nature of this type of financing and lack of institutional protection- obviously not the case when you are working with Wells Fargo. Additionally, you can sell the promissory note to an investor to liquidate your assets quickly. There are fewer regulations to sell, which speeds up the selling process; the property is able to be sold as-is, without the need for repairs and the requirement of having an appraisal is eliminated. Sellers are not required to pay property tax, homeowners insurance, and other maintenance expenses.
However, as with many things, there are also disadvantages to seller financing. Fewer regulations can result in more freedom, but, when not handled correctly, can wind up complicating the process.
If you feel as if seller financing might be the path forward in your personal real estate investing journey but don't know where to start, or want to be sure to avoid the possible pitfalls associated with seller financing, we are uniquely positioned to guide you and answer any questions you might have. The best way to protect yourself and your interests is to work with experienced and qualified professionals.
At Boise TurnKey, we want to help you have the best investing experience possible, and see your financial goals come to fruition. Give us a call at 208-957208 or email us at info@boiseturnkey.com. We look forward to financing with you.
