The last home I sold was on the market for less than two weeks! I put up a sign that says “For Sale by Owner / Will Finance Low Down / Low Monthly / No Banks! Call XXX-XXX-XXXX……….. This home was sold to a young family that was still living with parents in that very same neighborhood. They had a child on the way and needed a place of their own. They noticed the sign walking around the neighborhood, called, I set-up a showing and negotiated terms with the kids and parents. The parents even co-signed the note!!!! This is one deal, I plan on getting paid on once a month, for a long time to come:)- Today you need as many tools in your arsenal as possible. The creative use of Seller Financing is certain to make you stand above the crowd..
1.) The first advantage of seller financing is the speed in which you can move properties. It is tougher than it has been in years to get conventional financing on real estate. Seller financing eliminates the barriers presented by the conventional lending market. Offering to finance the purchase of your property opens up the possibilities of purchasing to a larger group of potential buyers. Since you are in control over the process, there is no “red tape” associated with bank loans. More potential buyers and less hassle equates to about a 20% quicker closing time verses properties requiring conventional financing. Speed and control, I like that! Current lending guidelines don’t apply since you are making the rules, you choose who to work with. This provides much greater flexibility, allowing the transaction to actually happen, because you as the seller make the decision regarding what it takes to qualify to purchase your property. The down payment, credit, debt to income requirements and other underwriting guidelines are up to you.
2.) When offering Seller Financing there is little back and forth over the price of the property. Since you are offering terms, you are making it easier for more buyers to qualify. I use this to create competition among the potential buyers and usually choose the one with the highest down payment and that can demonstrate the best ability to make the payments, and take care of the property. As long as you price your property in line with what an appraisal will be, there is simply no reason to negotiate the sale price. Negotiate the terms instead!
3.) For non Dealers: The use of seller financing and an installment sale can off-set potential capital gains as a result of your sale. Refer to IRS Publication 537, Form 6252 and speak to a qualified tax professional for further details.
4.) When you sell a property using seller financing you end up with a Promissory Note which is a Secured Asset that provides Interest Income. As mentioned at the beginning of this article, I did one deal and plan on getting paid once a month for that deal, for a long time to come! From now on the toughest job I will have in regards to that property should only be to cash the payment check that comes in the mail box each month. Should the buyer fail to pay or default on the note, the note holder has the right to take the property back and re sell it to another buyer….
5.) A Promissory Note secured by real estate is a Liquid Asset that can be sold for cash should the need arise. Over time many note holders elect to sell their notes into the secondary market verses collecting small monthly payments over time. The choice is yours, sit back and collect payments every month or sell those payments for a lump sum of cash now!
Please note that laws and the process of Seller Financing are different from state to state. We recommend that you consult with qualified real estate, tax and legal professionals and closing with an attorney or title company. Don’t let your solution today be your heartache tomorrow!