How to Get Seller Financing for a Home

Having trouble getting traditional financing? If the seller doesn't need all the cash from the sale of the property to buy another home, he or she might be willing to offer you seller financing.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• Real Estate Agents
• Real Estate Attorneys
• Online Mortgage/finance Services

1. Find out if the seller still owes anything on the property. If the property has no liens against it, the seller could also act as the lender in the transaction; payments would be made to the seller, not to a mortgage lender or banking institution.

2. Make an offer to the seller. Make it clear that you want the seller to finance the purchase.

3. Handle the purchase agreement just as you would with a regular lender - only you'll be the one to offer what terms you want: how much you want to finance (this depends on your down payment), how long you want to finance and what interest rate you want to pay. Of course, the seller must agree to your offer. Use a purchase agreement and receipt-for-deposit form.

4. Open an escrow account with a title company or have a real estate attorney handle the transaction.

Tips & Warnings

• Make sure you know the value of the property before you commit yourself to the agreement. Include an appraisal contingency to make sure the home is worth what you're paying. (Appraisal cost: $300 to $350 for a single family residence.)
• The seller may want a copy of your credit report.
• Interest paid to a seller for seller financing is deductible as long as it follows the same guidelines as for a standard mortgage.
• The transaction time for seller financing is usually much shorter, as there is no formal loan approval process.
• Seller financing saves the buyer money: There are no lender fees, no loan fees, no points. It's a good deal.
• When you get an appraisal for a purchase, the appraiser will typically only confirm that the property is worth what you're paying. Most likely the appraisal won't be a true determination of value unless you instruct the appraiser to appraise the property for market value. (The appraiser will need the seller's approval to get into property. An appraisal should take anywhere from one to three weeks to complete, depending on how busy the appraiser is.)

[NoteWorld]

on 5/7/2008 Great information. Also make sure you have the new transaction managed by a reputable third party servicer. The headaches it will eliminate, from keeping track of original documents, proper application of principle, and year end tax reporting, can be the difference between a positive situation and a disaster. Check it out for yourself visit the best third party servicer in the US at: http://www.NoteWorld.com

[Nims]

on 3/3/2008 You can sale the Note (mortgage) for cash and you don't need to worry any more for payments www.cash4cashflows.com/nyanay
Summary of Seller Financing
The benefit of seller financing

Many home owners dread being involved in a situation where a property they've listed for sale has been sitting unsold for too long. The basic reason is usually the same - the asking price is too high for the market conditions.

In these situations, the seller is forced to lower their price in hopes of making the property more attractive to buyers. Unfortunately, this technique doesn't always work to sell the real estate, especially if the seller is unwilling to "discount" their house by much, or if the market is weak.

A great solution for the seller is to open up to an entirely different segment of buyers by offering seller financing. This way, the property owner can often sell their house for th

[Ottoman]

on 8/28/2007 Thank you for writing the how to seller finance a property. I have been trying to get a straight answer on that for a while. I only wish you told how to set up the escrow, record the lein, record the land contract etc portion of it. All-in-all it was a great article. Thank you!!

on 8/8/2006 If the seller is interested in seller financing, but needs cash at closing, you can suggest a simultaneous closing. The seller would sell the property, taking back a mortgage and then turn around and sell this mortgage note at closing for cash.

on 11/22/2005 For sellers of single family residences, set your note rate above 9% and avoid balloons shorter than 7 years. If you ever sell your note, its value will increase significantly in the secondary market. Good tutorial can be found at Noteworld.com.