Seller Financing

You are selling your house to a friend who has been pining to own your home for years.  The only problem is she can't afford to pay it in full or based on the terms that you want.  Because you don't necessarily need the money of the house sale right at that moment, you decide to help your friend out.  This is when seller financing steps.

Seller financing is actually when the seller helps in financing the sale of his own home especially if he owns his home fully.  This is usually done when a buyer, whom the seller favors, finds it difficult to meet the qualifications needed for a loan or mortgage or if she or he could not meet the asking price for the house.

This process is different from a buyer's getting a typical loan from a firm because here, the seller won't be giving any amount of money to the buyer.  He will, instead, extend a credit against the asking price for his home.  The buyer, in turn, will have a trust deed and promissory not executed in the favor of the seller.  However, this arrangement should also be satisfactory to the lender, who made the first mortgage on the property if the seller does not own his home fully.

Of course, a title or an escrow company has to deal with and prepare the necessary paperwork for this arrangement after the seller and the buyer has already had the terms ironed out. 

If you are the seller in this agreement, it is imperative that a complete evaluation has been done on the buyer's worthiness as a creditor.  A hazard insurance should also be secured on your property with a due-on-sale clause included in it.  Other requirements such as disclosure and repayment terms as well as financing that must be seen to.  You would also want to consult with a lawyer in trying to put everything together when it comes to this type of transaction.  This is to safeguard your interest as a seller in the arrangement as the buyer might renege on his or her word and a default could happen. 

There are certain cases though when seller financing brings a higher gain in the selling price of a property which is advantageous to the seller.  The sale is completed in the soonest time as well.  Besides, this scheme also provides certain tax breaks for the sellers.

So, if you really plan on helping out your friend buy your home, you might look into the seller financing and see if it works out for you both.  In the end, you'll be able to get the money for that home that you sold as well as made sure that it is left in the good hands of your friend.