Seller financing

[Josh Richter]

how exactly does seller financing work?

[Nick Baldo]

Hi @Josh Richter,

Seller financing means that the person from whom you purchase a property becomes the lender and mortgage holder for the home once you take ownership. 

Seller financing is a form of private lending. Private lending simply means that you are borrowing money from an individual rather than a conventional financial institution (bank). The seller will typically require some amount of down payment...though often they require less than a conventional lender would need. You come up with the down payment, execute a promissory note with the seller and on the day you close a mortgage is filed. In my experience, seller financing can be achieved at rates slightly higher than banks but lower than hard money lenders. 

Seller financing is typically an option when the seller owns a property free and clear or with a very small mortgage amount. 

Personally, my business has found sellers to be motivated to offer seller financing if they want a passive monthly income stream. In a rental property situation, they desire the passive income without the hassle of managing a property and tenants. Lastly, sellers may find a tax benefit from receiving sale proceeds over time as opposed to all at once at closing. 

Hope that helps...feel free to reach out with any specific questions.