What are the different types of seller financing?

Question

As I read the older posts there were 2 or 3 types of seller financing mentioned.  I'm interested to know about the different types of seller financing.  Thanks.

James Wise · Answer

@Rasheed  Chambers

Welcome to the site.

If your just buying real estate alone you would likely be better buying it in your own name. As a bank won't give out residential financing to your LLC.

My company The Holton-Wise Property Group is a whole different animal. We are a Real Estate Brokerage/Property management company / General contracting company

Rasheed Chambers · Answer

Hello all I don't mean to change the subject in anyway, I am new to the site and I noticed that James Wise added his company name in his signature. So my question is to anyone who can answer, what are the benefits of starting a business to purchase real estate opposed to purchasing real estate in your own name? Also would you suggest that a newbie to real estate investing start a company for their first deals?

Teresia M. · Answer

Brian you mention above you would look strongly a an installment sales contract...I've read where you wrote this in other posts.  Please explain installment sales contract and how that works.  I have 13 potential seller financing deals and am interested in the installment sales contract and where would I get one.  Thanks in advance.

Brian Gibbons · Answer

First off I would find a NY real estate contract attorney

Seller financing -  my definition is "the seller is helping the buyer buy the property in some way"

Seller can offer a lease purchase where the buyer agrees to rent for a while and then they have a timeframe to buy the property, if they fail to buy they forfeit EMD or earnest money deposit, NY has a law about specific performance in realty residential contracts.

Lease with option is similar.

Installment sale or land contract - usually get a larger down payment, repossession ability depends on state laws.  Not as fast or cheap to repossess as renting.  Ohio has a great repossession law on land contract, close to evicting.

ROFR or right of first refusal and a lease can be a tool to motivate the buyer to buy.

Buyer Incentives like paying all closing costs or even "we will pay first 3 mortgage payments" like the apartment ads, or "free 99 inch plasma ultra smart tv with purchase" always help sellers sell

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For buyers buying on seller financing, I would first go to a RMLO or  registered mortgage loan originator; unless you've been under a rock since January 10, 2014 the federal government has made seller financing difficult. So if the RMLO has looked at your (Buyer's) 1003 federal mortgage application and you produce a written letter to a potential seller financing seller saying that "you should be able to get a mortgage down the road " That should help you negotiate a good deal for yourself.

If I were buying on seller financing I would look strongly at an installment sales contract, dollar for dollar reducing my principal balance, and get as long of a term as possible.  You can then possible refinance that agreement into a traditional 30 yr FHA mortage or conventional mortgage. Be sure to record the contract for deed document, and send payments to note servicing company, and that co sends to bank.

There are two other ways to buy on seller financing are subject to existing financing and a note and wraparound mortgages.  There are pitfalls to these two particular strategies but they can be done.

Account Closed

Account Closed · Answer

Thanks so much Brian for your quick response.

Rasheed Chambers · Answer

That makes since, thanks for the lightning fast response James it is much appreciated!

James Wise · Answer

Private mortgage---This is the best position for a buyer to be in. Title transfers into your name like a regular sale and the seller holds a mortgage just like a bank would.

Land contract---This is a better position for the seller. Title stays in the sellers name until the buyer performs.

What are the different types of seller financing?

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