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Sellers can tempt buyers with attractive financing
In a difficult selling environment, there is one surefire way for a property owner to lure buyers. That approach, which is not without risks, is seller financing.
Any risks can be minimized, and the strategy can prove to be win-win for buyer and seller alike: The seller gets to unload a property and obtain a higher rate of interest than with most other options, while the buyer avoids the hassle and uncertainty of borrowing from a conventional lender.
As Rockville lawyer Harvey S. Jacobs has pointed out in the Washington Post, it is essential for the seller to insist on a substantial down payment of at least 30 percent.
Another issue is whether the interest rate that the seller charges will prove to be enough over the life of the loan, or too much. If you worry that rates will fall, Jacobs adds in his column, consider imposing a prepayment penalty in your promissory note.
If you think interest rates will rise, you may want to offer an adjustable rate mortgage (ARM) instead of a fix-rate instrument.
Because there is a market for notes that are current and at least six months old, it’s a good idea to be sure that ... more
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