My husband and I have a parcel of bare, unimproved land in South Carolina for sale and a potential buyer is asking is we would consider owner financing. What are the benefits and potential downsides to this?
Would be the easiest way to get the best price.....if they stop paying you have to foreclose, or sell by land contract.
Depending on your particular situation, here are a few benefits that can be associated with seller financing.
Benefit = You collect a down payment and a mortgage for the balance. If the buyer is unable to pay then you regain ownership of the property.
Benefit = Seller financing (installment sales) can be a tax strategy and provide additional income to the seller. Under the general rule for computing gains and losses from the sale of property, the taxpayer recognizes the entire amount of gain or loss at the time of sale. However, the installment sales provision is to prevent hardships caused by large taxable gains thus allowing the taxpayer to spread the gain from installment sales over the collection period. So instead of paying tax on all your gain in the year of the sale, simply shift the taxes over the term of the mortgage.
Benefit = The is interest income from the mortgage. You'll pay tax on the interest the year its received, but it can be offset with other interest expense, and reduce your tax.
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