Sellers Who Hold Financing may see a lot of Green!

Ok. The real estate market for sellers has been very challenging over the past 12 months or so and by most accounts will continue to be until at least this time next year. But some sellers are taking advantage of one method of selling there home that hasn't been around in a long time. That method is seller held financing!

Seller held financing is becomming more popular and I feel is a great way for sellers who may own their home outright, to sell their current home to buyers who may not have the necessary down payment to qualify for conventional financing. Lending requirements have tightened significantly over the past 12 months eliminating many buyers from the market. Previously buyers who otherwise had great credit but may not have had down payment could qualify for conventional financing. Or perhaps the buyers had enough for some down payment, perhaps 3% but the property was priced outside of current FHA loan limits. How does this process work?

It is quite simple. In essence the seller becomes the bank. The buyer and seller enter into negotiations for the purchase of the sellers property. In addition to price, closing costs/dates, down payments etc, the buyer and seller also negotiate financing terms between buyer and seller. At closing the buyer agrees to give the seller a lien against the property and seller agrees to accept payment from buyer per the terms of the contract. In most cases sellers will build into the financing a balloon payment at a future date. For example the seller accepts payments with interest for a period of 2 or three years and at that time the balance is due and payable. This gives the buyer the option of selling the home or refinancing the property and paying the seller off at that time.

I know this may not work for all sellers or for some buyers. But for those sellers who are able to wait for the balance of the sale it may be a great way to offload the property and make some extra money in the interim. There are risks and I would strongly encourage anyone who considers this option as a method of transferring title of a property to seek the council of a licensed Real Estate Attorney.