Advantages & Disadvantages of Financing Your Buyers When Selling Your House

Hi. This is Gerri McKinley, with Coldwell Banker Costal Rivers Realty, here in North Carolina, here to talk to you about some real estate questions and concerns and issues that come up. Today, we're going to talk about the pros and cons of seller financing, what would be the advantages or disadvantages to you, either as a buyer or a seller. Let's talk about the buyer first because it would be an advantage to him. The lending requirements have become extremely tight now. In the past, if you had a breath or a pulse, you could get a loan but those days are over. Now, it's much more restrictive and there's some reason sometimes that people cannot obtain financing through a conventional way. So, seller financing has enabled them sometimes to go ahead and get the property. Perhaps, if you haven't sold your home in another state and you have to transfer here for a job, it can get you through that time, so that's an advantage for you. You would still be paying interest, you can still deduct it, so it's not a disadvantage for you in that way. On the other hand, for the seller, there's some advantages there too, but there's disadvantages. He doesn't get his money all at one time when he sells a property under owner financing. He's holding the note, he is the bank when he does seller financing and so, therefore, he's only going to get a monthly payment. So, if he had any plans to reinvest that money, that's gone, he can't do that at that time. However, right now, same again, the lenders, the banks are not paying hardly any interest, minimal, you know, one percent, two if you can find somewhere. But, with seller financing, you usually can get six to eight percent so, nowhere else can you put your money to work like that. So, if a person has the luxury of no mortgage on their property, they can do seller financing. If they already owe a mortgage to a bank, they can't do seller financing. You have to own the house free and clear and, if you can do that, that's better than putting it in any CD or in the bank because you're gaining much more interest if you have a good candidate. So, you're going to want to check their credit references and their employment, just like a lender would. But that is a big advantage for a seller in that case; so he would get a higher rate of return overall when he gets finished. Also, steady income to him. Some senior citizens that's a great thing, they've got a steady income each month. But, the disadvantages would be they wouldn't have their money all at one time, so, there's pros and cons. So, we're talking today about the disadvantages and advantages of seller financing and how you can do it or not. So, thanks for joining us for that. And, this is Gerri McKinley with Coldwell Banker.