What is seller financing? why should it be used? Well, in short, seller financing is simply an agreement in real estate in which the seller of the property acts as the mortgage lender for the buyer instead of a traditional bank or financing institution.
This can be a valuable tool for both the buyer and seller. Especially in tight credit markets where supply is outdoing demand. Usually this means traditional financing, such as a conventional mortgage, FHA, or other loan programs are unavailable to the buyer.
So what is a buyer and seller supposed to do in these situations? Well, a great way to see the deal forward is through seller financing. The benefit to the seller is fixed income over the course of a period of time. This can be something like 5 years, with a balloon payment at the end of those 5 years. And it can include interest, just like any conventional loan.
The benefit to the buyer is that there can be less hoops to jump through to qualify for the purchase. Plus, you can still enjoy the home you really want. This doesn’t mean you have better terms, but there can be more negotiation on qualifying for the financing that you might get with a bank.
It’s important to understand the ins and outs of seller financing before proposing it to either a buyer or seller, so that neither party is displeased with the deal. Check out the video below for more information. Jared and Justin go into detail on seller financing, its usefulness, when to use it, and why.