Home > Blogs > Gary Woltal > Gary Woltal's Blog

Show Me The Money Often Means It Is The Seller's Own

By Gary Woltal

Real Estate Agent with Keller Williams Realty 0575737

April 24, 2009 08:55 AM

With the tight credit even starting at FICO scores of 620 nowadays Sellers itching to get the heck out of Dodge with their house, talk with real estate professionals and often learn that

Show Me The Money Often Means It Is The Seller's Own.

Yes, we are talking Seller Financing here. Not done obviously as typical as commercial lenders but definitely a doable deal. For the buyer oftentimes renting is a better option depending on the payments. For the Seller if the Buyer defaults too early on a home the house comes back to them. If they default ten years down the road it is a great investment.

Standard seller financing means the Seller is the bank. Everything is negotiable on the table. Interest rate is typically higher than market. Payment terms can be made monthly or even quarterly. Insurance and ad valorem taxes need to be paid by the buyer. In the contract, due on sale and prepayment language needs to be included. Also late payment charges and hazard insurance needs to be addressed.

There are variations to seller financing like second liens called wrap arounds where you wrap an existing debt with the new debt for the Seller to achieve a higher earned total interest rate than their previous debt obligation. Get the advice of a good real estate attorney to draft the proper documents. Lease purchases are another form of Seller financing and each state has various rules in this area for constructing such a contract. Check with your local Real Estate professional.

Seller financing offers a way to sell a house when credit is tight and most often when the property is held free and clear. To get houses moving these days the agent has to be creative and look at ALL financing alternatives. If it is a fit, discuss the basics of it with the client, and consult a legal expert to put the properly worded contract together to protect all parties. Remember in this area, EVERYTHING is negotiable and if you want to make it work for buyer and seller listen to all their needs and come to some meeting of the minds.

Comments(30)

Comment

Show All Comments

Sort:

Mark Watterson

Salt Lake City, UT

Utah Real Estate

Seller financing is always an option. Much more attractive for both parties in tough markets.

Apr 24, 2009 10:22 AM

Gary Woltal

Keller Williams Realty - Flower Mound, TX

Assoc. Broker Realtor SFR Dallas Ft. Worth

Sharon: When you find the wheelbarrow of money have a few bills blow by as you pass my way : )

Sally: You are right on that third number.

Bryant: Being underwater makes this even a more remote option in some markets.

Connie: Almost like a cash buyer with that smile.

Sandra: Higher down payments and those high FICO scores like you mentioned might drive people to this.

Luke: Probably some areas of the country have more paid off properties.

Dorie: More options on the table more deals won.

Troy: I think a lot of people don't consider it when they can do it.

Andrea: An increase in this area is a possibility.

Pat: Out of the box thinking is another arrow in your quiver.

Mark: About a third of homes are paid off. It is something to look at.

Apr 24, 2009 10:28 AM

William Feela

WHISPERING PINES REALTY - North Branch, MN

Realtor, Whispering Pines Realty 651-674-5999 No.

High Gary. You are so right. I am working 2 deals right now that include owner financing of some sort.

Apr 24, 2009 10:43 AM

Chris Ann Cleland

Long and Foster Real Estate - Gainesville, VA

Associate Broker, Bristow, VA

Gary: I can wrap my head around most things, but those wraparound mortgages make my brain hurt.

Apr 24, 2009 10:58 AM

Susan Mangigian

RE/MAX Preferred - West Chester, PA

Chester & Delaware County Homes, Delaware and Ches

I have been thinking of this as a means to sell one of my own listings but my fear is that if I suggest it, and the buyer defaults, and the seller has to go to court to foreclose, I'll end up with a very unhappy client.

Apr 24, 2009 11:04 AM

Tammy Lankford,

Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA

Broker GA Lake Sinclair/Eatonton/Milledgeville

I just put together a lease/purchase deal with seller financing. The lease is 6 months to give a "test" period for on time payments before the seller does seller financing. We'll see what happens.

Apr 24, 2009 11:31 AM

Mara Hawks

First Realty Auburn - Auburn, AL

Inactive-2012 REALTOR - Homes for Sale Auburn Real Estate, AL

I only want cash buyers...but, reality means look at all options. I remember when sellers were offering financing for buyers back in the early 80's. Interesting reminder and option for today!

Apr 24, 2009 12:50 PM

Hannah Williams

HomeStarr Realty - Philadelphia, PA

Expertise NE Philadelphia & Bucks 215-820-3376

Gary..boy that reminds of the late 70's early 80's when interest rates were 19% and higher..great food for thought..Thank you tweet

HelpfulHannah your friend in Philadelphia

Apr 24, 2009 03:16 PM

Kate Elim

Dockside Realty - Spotsylvania, VA

Realtor 540-226-1964, Selling Homes & Land a

Hi Gary...We bought a home in McLean, Virginia (northern VA) in 1981. The going rate was 18% at the time and we did seller financing for 13% and very happy to have that option.

The rates are absolutely wonderful right now.

Kate

Apr 24, 2009 03:23 PM

Myrl Jeffcoat

Sacramento, CA

Greater Sacramento Realtor - Retired

We did a lot of seller financing in the 1980s. Most loans were assumable back then, so we'd find houses for buyers which had good assumable loans with low interest rates, and little equity. That way, a buyer could put a few thousand down, assume the existing first, and if need be the seller would carry a second for a few years.

Apr 24, 2009 03:30 PM

Sherry Siegel, Managing Broker, EcoBroker, ABR

BrokersGroup, serving Sequim and Port Angeles - Sequim, WA

Gosh, all this remembering...I remember buying the first home when my husband was in the military. $15,000, my salary didn't get to count, our payments couldn't be higher than 25% of his military pay. Sold it two yrs. later for a profit of $11,000. bought the 2nd home on the CalVet loan at a ridiculously low rate, while regular rates were where Kathleen remembered them: 18%. Years later on my own, I bought a condo that was assumable!! Could still be done in the mid 80s. TODAY's rates make those early years look challenging. We have enough Seller financing happening around here to make it worthwhile. Is it generally true (in anyone's experience here) that if a buyer is going to default, it will usually be within the first six months?

Apr 24, 2009 06:03 PM

Virginia Hepp - Mesquite NV REALTOR

Desert Gold Realty - Mesquite NV Homes For Sale - Mesquite, NV

Mesquite NV Homes and Neighborhoods - Search MLS

I have seen more offers of seller financing in the MLS lately - can be a good solution, if careful.

Apr 24, 2009 06:26 PM

Allison Stewart

St.Cloud Homes - Saint Cloud, FL

St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904

Gary- You have raised an interesting topic- Seller financing if executed properly can be a great annuity for a seller. Having a stready income flow over a fixed period of time. It also allows the seller to have the loan secured with the property should the buyer default. Few people, however take advantage of this option...perhaps more should. It takes money to make money. In order to finance the home you are selling you have to able to afford to move somewhere else or have special circumstances like consolidating households for instance. Certainly worth considering- and ABSOLUTELY have a good real estate attorney to draft the agreement.

Apr 24, 2009 10:45 PM

Bill Gassett

RE/MAX Executive Realty - Hopkinton, MA

Metrowest Massachusetts Real Estate

We used to see seller financing a lot more years ago than we do today. WIth interest rates as low as they are it is not a bad move for a seller looking to make a better return on investment. I love the wheel barrell dude:)

Apr 24, 2009 11:25 PM

Mark Brian

Silver Star Real Estate LLC - Anderson, SC

Anderson SC Realtor

I get so many calls for seller financing and lease purchase that I ask when listing a property if they woulod consider it and under what terms. It is not for every seller but when it is, it opens up a whole new world of possible buyers.

Apr 25, 2009 02:16 AM

Bernice Dubon

RE/MAX First 403-607-9117 - Calgary, AB

Calgary Alberta Realtor

Interesting topic considering the market we're in. Which sellers would you say, are in the best position to offer Seller Financing?

Bernice Dubon, Royal LePage Solutions in Calgary Alberta

www.yourhomeincalgary.com

Apr 26, 2009 05:40 AM

Carol Culkin

Diamond Partners Inc - Overland Park, KS

Overland Park Residential Real Estate

Gary - Since NY is an attorney state, seller financing can be a problem. Most lawyers will say it's a risk and talk the seller right out of it.

Apr 28, 2009 11:35 AM

Team Honeycutt

Allen Tate - Concord, NC

It is great to find the ones who do have some equity or no loan at all. These always seem to go very smooth!!!

Apr 29, 2009 04:13 AM

Gita Bantwal

RE/MAX Centre Realtors - Warwick, PA

REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

I agree . It will be nice if sellers can offer some financing.

Apr 30, 2009 11:06 PM

Michelle Finnamore

Toronto GTA, Alliston, Newmarket - Vaughan, ON

Preparing your property for sale

HI Gary, I bought my first house back in 1981 during a meltdown by the owner holding the mortgage. It worked then and it will work now. There is always a solution, you just have to keep looking for the one that fits.

May 04, 2009 12:31 AM