Appreciating the benefits of seller financing may not be for everyone, but it could very well get that listing sold if the right kind of seller and buyer come together.
I know many may think this is not a good idea, but if the stars are aligned just right, I think we owe it to the sellers we interview to bring up the possibility of them financing a loan for a potential buyer.
More potential buyers - creating a seller market - will be attracted to the listing for sure. But here are a few more seller benefits that can be achieved with seller financing:
- Net profits greater than other investment types
- Cash flow stream
- Liquid asset, can be sold or used as collateral to borrow
- Close the transaction more quickly
- Defer Capital Gains (key word being defer NOT avoid)
- May take the property back if buyer defaults
Here are some of the benefits to the Buyer:
- Develops equity faster
- No bank underwriting fees
- Fewer closing costs
- Seller determines acceptable down payment
- No PMI
- Tax advantages
Lease Option to Buy is yet another way for the two parties to come to an agreement.
There are many State specific laws and regulations regarding these transactions so make sure you speak with an agent, like myself, who knows about these financing alternatives and who has a team of colleagues who can help prospective sellers (and buyers) understand the risks and benefits with any of these transactions.