SELLER FINANCING:
Whether you call it “creative financing”, “seller financing”, or “Seller carry-back”, it is an option that the seller may chose to sell their property to a purchaser. This is when the seller becomes the “bank”.

Some of the reasons for this type of sale may be:

• The seller owns the property free and clear and does not want to receive all the proceeds at once but would rather receive it over time and therefore avoid all the capital gain tax at once. (They only pay based on the amount received at closing and the installments received in that calendar year.) Advise should be obtained by the seller from their accountant to get clarification on how this will affect them.
• The property may not fully appraise, but the parties want to continue with the sale.
• The property may not be eligible for traditional financing at this time.
• The purchasers may not qualify for traditional financing at this time due to credit issues.
• The property may be commercial property with unusual terms.

Some of the items to consider with this type of sale:

1. Interests rate – typically the interest rates the purchaser will pay will be 1- 1.5% over the current traditional financing. Sellers LOVE this investment on their money.
2. Will the security documents be Note and deed of trust or Real Estate contract – the parties should seek the legal advice of their attorneys to determine which meets their needs.
3. Payment due date – should be agreed upon by both seller and purchaser.
4. When will the first payment be made?
5. Will there be a late charge? How much will it be?
6. Will the payment amount be amortized over 30 years?
7. Will the payment also include a reserve payment for 1/12th of taxes and insurance? Sellers like this added protection.
8. Will there be an all due and payable date? Three years, five years, or whatever?
9. Will the payments and security documents be placed with an independent third-party long-term escrow collection company? Great protection for all parties.
10. Will the fees be split 50/50 or all paid for by the purchaser?

If this is something you as a seller, or you as a purchaser would like to have more information on, contact your real estate agent. Or you can reach me at ClockHoursByAngie@gmail.com.