Forget the Bank - Seller Financing

Seller Financing Can Be a Win-Win Situation
Once a popular method to finance a property, seller financing took a back seat in recent years to traditional financing due to low interest rates and relaxed lending standards. But, it's back!

Seller financing is fast becoming popular for sellers who can make their properties more attractive to buyers by providing the financing at attractive terms. Buyers like seller financing because it can avoid some of the huge fees that traditional lenders charge to close a loan.

In addition, buyers with low credit scores or stated income may find dealing with a seller/lender a bit easier and less cumbersome than a traditional lender.

Both parties like the speediness of the closing process. Most commercial and land loans can take months to close. Seller-financed transactions can close in far less time.

Land and commercial properties can be especially difficult to finance using traditional lenders. Seller financing provides flexibility of terms so that both seller and buyer can successfully close the transaction.

Sellers can benefit several ways. First, they get the property sold. Second, they may be offered a better price because the buyer may be willing to pay a premium to not have to proceed with traditional financing. Third, the seller receives principal and interest payments providing an on-going source of income.

More important, Sellers can defer capital gains tax because the net capital gain can be spread over the term of the loan. Furthermore, the seller may be able to stay in a lower tax bracket the year the property is sold. (Sellers should consult with their tax attorney or consultant for advice on this matter.)

The risk to the seller is reduced since the property is used as collateral. Sellers are advised to receive a large down-payment at time of closing. If the seller/lender must foreclose on the new buyer, the seller will have the down-payment, any payments made to date, and get the property back!