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
(1) Temporary and symbolic payment showing good faith and obligating two or more individuals until a final transaction takes place. The binder is typically returned if the final agreement ...
A cooperating broker or agent defines a real estate broker who helps another broker in a private property transaction. Typically, the cooperating broker represents the seller and is ...
A legally transferable debt instrument by which the issuer agrees to pay the payee within a certain time period. Note usually pay a specified rate of interest tied to the market rate of ...
(1) Type of loan where the final payment is substantially greater than the previous payments; also termed partially amortized loan. A debt agreement might stipulate a balloon payment when ...
Earthquake insurance is the type of insurance policy that specifically covers damages to your real estate caused by seismic activities. It can refer both to the rare coverage against ...
Latin: now for then. Descriptive of actions which are performed after a deadline has elapsed, but retroactively have the same effect as if they were carried out in a timely manner. For ...
(1) Methods that involve discounting the future cash flows generated by an income property. These techniques are used primarily for valuation. (2) Methods of selecting and ranking ...
Approach to appraise rental property based on anticipated future earnings to be derived from it plus the estimated selling price at the end of he period held. ...
Landowner's legal right to the water found on his property. For example, there might be a stream of water adjacent to the land. The water might be used for irrigation or other purposes. ...
Have a question or comment?
We're here to help.