To have a full understanding of what Seller Financing is- Please refer to our blog post – “How to Use ‘Seller Financing’ to Sell a House for More Money”
As a homeowner who is considering using seller financing to sell their property, you might have several questions such as, What is in seller financing for me? What do I tend to gain or lose, using it? Why would I agree to wait to get paid for selling my property and do a carry-back loan?
These are very good questions and you should ask them. The pros and cons are laid out for your consideration as follows:
Pros of Using Seller Financing
- Higher Purchase Price
One of the advantages of using seller financing is that the seller gets a higher purchase price on their property. The reason is that the buyer buying real estate on seller financing tends to pay more money than what they would usually pay in a cash transaction. This higher price is in exchange for a longer period that the seller would have to wait for before the loan is paid off by the buyer.
- Monthly Cash-flow
Besides getting a higher purchase price, seller financing offers the seller the benefit of receiving a monthly cash flow, which comes from interest payments on the seller’s carryback loan.
Cons of Using Seller Financing
- Risk of Buyer not Making Loan Payment
When a seller uses seller financing to sell their property, the seller might face the risk of loan payment defaults if the buyer fails to make a loan payment (agreed-upon amount) to the seller (lender) every month for a predetermined period as specified in the mortgage documents.
However, the seller who is the lender in seller financing can mitigate this risk by following the legal foreclosure process to regain ownership of their property if the buyer fails to repay the loan. This process involves seizing the subject property, which is the collateral for the loan. In addition, this process can be lengthy and expensive.
- Risk of Buyer not Fulfilling Loan Payoff
Not only can a seller face the risk of a buyer’s failure to make monthly mortgage payments, but also the risk of the buyer not paying off the loan at the agreed-upon due date.
In this situation, the seller can also reduce their risk as aforementioned under “Risk of Buyer not Making Mortgage Payment.”
At Kevalla Investments, LLC, our #1 goal is to help homeowners achieve their selling goals. For a real estate investment company that will buy your property as-is, for a higher piece with seller financing without closing costs or commissions, contact us now by calling/texting (240) 449-1770 or filling in this simple form to see if we can help.
This blog is only to enlighten the readers and is not meant to be used for tax, real estate, financial, insurance, legal, or investment advice. Kevalla Investments, LLC encourages you to contact a professional regarding your circumstances. Please confer with your advisor when making financial or legal decisions.