Seller financing occurs when a seller helps to finance a real estate sale. It is usually used when the buyer has trouble meeting the purchase price or can't otherwise qualify for a conventional loan. This process is different from a traditional loan, because the seller doesn't give the buyer cash for the entire price as a typical lender would to make the purchase.
Seller financing can be a good solution when the buyer can't qualify for a conventional loan. The transaction sometimes offers tax breaks for the seller and a way to purchase the property for the buyer who otherwise wouldn't be able to do so. However, seller financing transactions come with some risks.
Before a seller agrees to finance a transaction, it is very important for the seller to scrutinize the credit risk of the buyer, just as any other lender would do. The seller should also consider whether the property is likely to continue to hold enough value over the length of the transaction to allow the loan to be repaid in full.
Interested in learning more about the merits and hazards of seller financing? Consult with a real estate law firm experienced in seller financing arrangements. Our law firm has experience handling a wide range of real estate transactions. We can also help you assess the credit risk of the buyer, make sure the appropriate insurance is secured on the property, and include the appropriate legal language in the contract regarding repayment terms and disclosures to protect you. With these safeguards in place, seller financing might be just the arrangement to get your property sold.