Interest rate and Seller financing question

[George P.]

I keep finding articles that suggest that the sellers should charge the adequate interest when financing the house purchase.
(Example: http://www.frascona.com/resource/jag808-seller-carry-financing.htm An installment note must include an adequate stated rate of interest to be paid by the buyer to the seller. An adequate rate of interest is one that is equal to, or greater than, the Applicable Federal Rate ("AFR") published by the IRS on a monthly basis. (It is beyond the scope of this article to address the consequences of the stated rate of interest being less than the AFR.))

Does anyone know what (if any) issues might the seller encounter if he/she finances the property with 0% (or 1-2-3%) loan?

[Bill Walston]

Originally posted by George P.:

Does anyone know what (if any) issues might the seller encounter if he/she finances the property with 0% (or 1-2-3%) loan?

The first that comes to mind is the imputed interest covered in IRC 483. The IRS will impute (assume) interest if none is charged by the seller. You can find the IRS rates HERE.