Florida Sam's Home Seller "Tips"
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Selling Your Florida Home - Home Seller's Financing
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What is seller
financing? |
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Seller financing is when a seller helps
to finance a real estate transaction by taking back a
second note or even financing the entire purchase if the
seller owns the home free and clear. Usually sellers do
this when a buyer has difficulty qualifying for a
conventional loan or meeting the purchase price. Seller
financing differs from a traditional loan because the
seller does not give the buyer cash to complete the
purchase, as does a lender. Instead, it involves
extending a credit against the purchase price of the
home while the buyer executes a promissory note and
trust deed in the seller's favor. These special
circumstances must be acceptable to the lender who makes
the first mortgage on the property. The necessary
paperwork is prepared by the title or escrow company
after the terms are worked out between the buyer and
seller. |
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If you are a seller considering such an
arrangement, it is critical to thoroughly evaluate the
creditworthiness of the buyer first. Fear of default
makes many sellers reluctant to take back a second. But
seller financing can bring a higher price plus complete
the sale sooner in some situations. For more
information, contact the Internal Revenue Service for a
copy of its Publication 537, "Installment Sales." Order
by calling (800) TAX-FORM. |
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How are the rates set
for seller financing? |
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The interest rate on an owner-carried
loan is negotiable. Ask your agent to check with a
lender or mortgage broker to determine the current rate
on institutional first (or second) loans. Seller
financing typically costs less than conventional
financing because sellers don't charge loan fees
(points). Interest rates on an owner-carried loan will
also be influenced by current Treasury bill and
certificate of deposit rates. Sellers usually aren't
willing to carry a loan for a lower return than they
would earn if their money was invested elsewhere. |
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What are the benefits
of seller financing? |
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Seller financing offers tax breaks for
sellers and alternative financing for buyers who can't
qualify for conventional loans. If you are a seller, the
risks you face are the same as those facing any lender:
Is the borrower a good credit risk? Will the property
hold enough value over time to allow for the repayment
of all loans made against it? You should run a full
credit check on the borrower, require hazard insurance
on the property and include a due-on-sale clause. There
also are financing, disclosure and repayment-term
requirements that need to be met. It is wise to consult
a lawyer when putting together this kind of transaction. |
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Florida
Sam has the experience you need to help guide you
through the real estate transaction. She's been doing it
for over 25 years and is a senior real estate
professional. Have Florida Sam sell your property,
you'll be glad you did! |
