Selling Financing 101

2 Replies

I just heard about the idea of selling financing for the first time and I'm really intrigued.  Let me see if I have this right.  Let's say there is a property for sale at $400,000.  You could make two offers:  one at $375,000 with traditional financing and one at $450,000 with seller financing.  

Traditional Financing:

Pros for seller: Gets lump sum of $375,000 immediately  
Cons for seller: Closing costs, pays taxes on $375,000 (unless it's invested into a new property), $25,000 less than asking

Seller Financing:

Pros for seller: Gets $50,000 more than asking, no closing costs, no tax penalty  
Cons for seller: Paid out monthly ($1,250 for next 360 months), rather than a large lump sum

My question is this:  If the Seller says "Yes lets do seller financing".  Now what?  How do I get the legal contracts etc.  What else do I need to be aware of.  

@David Bittorf You have the general idea correct... although be careful offering that much above asking price. They may very well accept the ask price of $400k. If you are dealing directly with the seller then mention that you don’t have to worry about agent fees.

Reach out to a local title company and explain to them what you want to do. They can help with the paperwork. I’d also recommend connecting with a RE attorney.

Most likely they are not going to want to extend payments over 360 months (the seller doesn’t want to think about it for that long). Instead, you might see 30 year amortization with a 10 year balloon or something similar.

Thank you!  Title Company and Real Estate attorney are the key ingredients I was missing.  I figured that I could get creative with the length of time etc once I had a starting point.