Before beginning the discussion that how seller financing helps in the home sales, let's provide you a brief introduction of the seller financing.
What is seller financing?
Seller financing is the process in which the seller (owner of the property) finances the buyer for purchasing the home. In this type of adjustment, the seller plays the role of the lender. However, instead of providing the buyer with the cash, the seller reduces the down payment and extends credit to the buyer. A promissory note, containing the terms of the loan, is signed by the seller and the buyer. Also, a mortgage is recorded with the local records authority.
Furthermore, depending on the financial condition of the seller, he can finance the entire mortgage to the buyer or can lend the difference of amount between the home price and the approved amount of mortgage. The buyer repays the money over time, through monthly payments, with interest.
This type of loans, obtained through seller financing, are often short term. They are repaid in full in a period of few years and the buyer then can refinance the home with a traditional lender. This is good from the seller point of view as sellers cannot wait for about 30 years for the loan to be paid off. Also, there are the risks of getting exposed for extending the credit higher than the necessary.
From the above introduction, you must have got that how seller financing helps in the home sales. In the case, the buyer is not qualified for the mortgage, he can get financial help from the seller and also helps the seller in selling house fast. It facilitates the house sales in situations when they are almost to get cancelled due to the unavailability of the finances.
Moreover, you must be thinking that who will be benefited more from seller financing. Well, let us make you know that seller financing is beneficial for both- the seller and the buyer. Here we are enlisting the benefits for both:
Benefits to Buyer
Benefits to Seller
There are some implications involved in the seller financing, like figuring out the amortization period, calculating the interest rate and preparing documents. However, educating yourself on the process will definitely help you handle all these implications effectively; otherwise, you can consider seeking the help of an experienced real estate agent or lawyer. Now, you may want to learn these reasons why you need real estate agent to buy/sell your house.