Seller financing presents the real estate investor with numerous advantages. In fact, it is the absolute best way to get the money you need to purchase the seller’s property. This type of financing is just one of the ways to finance deals and is consider “private financing” as opposed to “conventional financing” from banks and mortgage companies.
Advantages to Financing by the Seller
There are distinct advantages to such a financing agreement. Not only does this type of financing benefit the buyer, but it also has advantages for the seller.
- No credit check
- No loan applications
- No banks
- No waiting
- Closing costs are minimal
- Don’t use any of your own money (most of the time)
- Better interest rate – The seller will often have a better interest rate than you can get. For instance, if you’re going to borrow money from an investor you might have to pay 10 to 12%. Yet the interest rate on the home they’re living in, especially if they have an FHA loan, may only be 6-7%, which is much better than 12% you would get from a private investor or money lender.
There are also benefits to the Seller for selling you the home and doing the financing.
- Close quickly – Foreclosure is the most common reason for wanting to close quickly.
Often they won’t call you until the Friday before the Tuesday that their house goes on auction on the courthouse steps. This has happened so many times.
The phone will ring on Thursday night or Friday, and it’ll be someone wanting to sell me his or her house. When I ask why, they tell me that it’s going to the courthouse steps on Tuesday.“Well, why did you wait until now?”
Why do they wait? Denial – They just don’t believe that they could possibly lose their home.
- Long-term income stream –Older people want security. A monthly income stream is security.
The seller can put in the contract that the buyers cannot pay them off early. When the older people pass away, what do they want? They want their children and grandchildren to remember them, and a monthly check for the next eight or ten years will do that. Now, when you tell an older seller that, you can see their eyes light up.
- Tax advantages – If you pay them $90,000 and they haven’t lived in the house in the last two years, they’re going to have pay taxes on the entire $90,000. However, if they are only receiving monthly payments, they only have to pay on what they actually received.
- More buyers will qualify – So much easier to sell it on terms
- Property sells faster
- Eliminates need for property management – If they don’t sell it they are probably going to have to rent it out, which will then be a real hassle.
Seller financing is just one of the ways to finance your real estate investment purchases. Dennis J. Henson now teaches all of the skills you need to develop for finding money in“Private Money”.Get yours now!