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For some borrowers, it is the only financing option available.
Is it deja vu or wasn't this question just asked yesterday?
Kathleen Daniels, Prob...
San Jose, CA
Ron and Alexandra Seigel
Morgan: As a mortgage banker with 50 years in the business,let me say this:
As a Realtor, the "Seller Finance" deals are like a cash deal. You need 1) No Appraisal 2) No mortgage approval 3) No applications. The mortgage world Does not exist. As a Realtor,with the exception of a cash buyer,I would do this "all day long." You sell the home, collect your commission and Go Home,what is wrong with that? As for the seller...he can accept a no down payment, but I would insist on at least 20% . He can charge whatever interest rate he wants under the "Usury Laws" of that state,and make a nice return on his money. He may even structure the mortgage with a balloon payment. These deals are done everyday and I have assisted many buyers and sellers on this type of transaction. There are many reasons why this is done. Some involve retirement,past credit history,etc. If it happens in your deal, be happy.
Saratoga Springs, UT
You get loan financed and you pay a higher premium.
Question was asked as recently as yesterday.
I bought my first two homes this way combined with one initially being a rent to own.
Seller makes great ROI
Buyer gets a loan when banks say no and it's usually less than hard money.
Seller becomes the bank.
Buyer pays higher interest with a deadline on a balloon payment typically,
Thomas J. Nelson, REAL...
La Jolla, CA
In 25 years I've yet to see a seller take the risk to finance a mortgage.
Advantage is the speed it can be done even if the buyer has questionable credit. Disadvantage to the seller is he does not have his money.
Richard hits it on the head.
Advantages: Quicker close, more lenient regarding credit scores.
Disadvantage: Higher interest rates.
for those with low credit scores, it's a lifesaver.... pay the vig though!!
for those who are credit worthy, they may close quickly and for minimal closing costs and worth it, if it's very short term...
Some home buyers are unable to qualify for institutional mortgage financing.
I have found that the only time that a seller is willing to finance is...
- They can't dump their property
- It is over priced, so will not appraise
- They want to make a $high$ interest rate
- They have a buyer with crappy credit
Advantage - fast closing
Disadvantage - higher rate.
So far, have not seen any seller financing.
disadvantage the buyer can stop paying the lein holder (seller ) and declare bankruptcy and the seller can lose his money . Not alway as good as it sounds
Usually, it is a short term and a higher rate. Advantages as Michael Jacobs noted
Others he answered.
Not a fan at all, why would they want to tie up their money and have something go wrong with their credit.
Typically the biggest disadvantage is the risk. The advantage is the possibility of a better than average return.
The greatest disadvantage is that they fall apart 80% of the time. The greatest advantage is that a Seller can leverage the likelihood of failure to their advantage with non-refundable down payments, higher rates, etc.
Easer credit, but tougher terms.
Morgan Rivas Advantage: Easier to qualify; Disadvantage: Higher interest rates
In 15 years I've seen it only once - for a small second mortgage
Morgan Rivas - some buyers may not be eligible for a regular mortgage so that is to their advantage.
No underwriters, no loan costs.
You will usually pay a higher interest rate than market.
Sometimes it is the only option.
Buyer not eligible for regular mortgage.
The seller can create a high yield income stream secured by real estate.
In a declinging market when homes ar enot selling, sellers need to finance in order to sell and can get a better price. In this market, things sell fast enough with out putting aseller at risk
My goodness that is a whole blog topic. The answer may be included in your prelicense textbook too.
Advantages - buyer can purchase when they may not qualify for conventional financing and seller gets regular checks each month and can foreclose on the property if the buyer doesn't pay. Disadvantages - seller may have to foreclose on property and doesn't get full funds out of the home right away.
Too broad of a question.
Very unlikely to see this in real life. Most sellers need the money and can't qualify for their purchase with the house still on their balance sheet.
I have seen some investment properties (three city blocks of condos, about 20 units total), where the seller mandated that seller financing was to happen for most or all of the loan. That was a really wierd one and I steered clear from it.
Back in the day when mortgages were assumeable. . . they were a great way to sell a home and the seller could make above average interest rate and more money over time if they did not not need all their equity. .. . Now days, I would tred lightly because of the non assumption clauses, cover all basis and know exactly what your are doing. Usually all inclusive trust deed is the best should the seller have to foreclose on the buyer. Have a experience title company and collection agency work with you. . . , personally now days I would wait for a well qualified buyer.
Great answers here already. A
Quicker settlement ! Lower costs !