Seller Financing
Definition of "Seller financing"
If buyers are considering a home with an assumable mortgage at a fair interest rate or if the sellers have already paid their mortgage, remember to consider seller financing. With seller financing, the seller determines the sale price and then acts much like a lender. He or she determines the amount of down payment and the others terms of sale. Seller financing becomes more common when interest rates are high and buying a home is out of reach for many who could otherwise not afford it. But regardless of interest rates, this option helps qualify people to buy who might not be able to qualify for a loan through a lending institution or who may have the income to afford monthly payments but not the cash for a down payment. With seller financing, borrowers whom lenders might consider marginally qualified not only may qualify to buy but also may save money because closing costs are often nonexistent or less expensive than with lender financing. Seller financing is treated as an installment sale for tax purposes, and the seller will be taxed only on the proportional amount of gain received each year. Finally, if the buyer defaults, the seller can take the property back under the contract or, if absolutely necessary, he can foreclose on the property. A seller can also offer a wraparound mortgage to a buyer who already owns a home. With this option, the seller makes a money advance to cover or 'wrap' the balance due on the old mortgage and the amount on the new loan at an interest rate below market levels.
Popular Real Estate Terms
Space that is available to all tenants or owners, such as a courtyard, main entrance, elevator, and pool. ...
Retail businesses in the same locality having a parking lot servicing them. The center may contain a department store, small retailers, and restaurants. There may also be a movie theater. ...
The term annuity due is a contract that demands payment at the beginning of each period. The most common example of an annuity due in real estate is rent when we consider that most ...
Property that is unoccupied and thus not being used. It is usually raw land with no structure or improvements theron. ...
The gross operating income definition is the total income that a real estate development receives from rentals and services before any costs or expenses are subtracted. Gross operating ...
Doing business as, or DBA, means an official moniker for your enterprise or company. Regularly, a DBA is a state certificate serving as a registration name and issued under a ...
The Internal Revenue Code (IRC Sections 1034 and 121) providing that a person over age 55 can sell a principal residence at a gain and exclude once in a life time up to $125,000 of the gain ...
If you're involved in real estate, whether buying, selling, or investing, you might have come across the term "alluvium." It's not just a fancy word but an important concept. Let's delve ...
A mortgage loan is nothing more than a real estate debt instrument. Acquiring a mortgage loan is the most common method of financing a home in America. The benefits are tremendous and ...
Have a question or comment?
We're here to help.