Seller financing does not occur very often, as it is usually only an option under very specific circumstances. For starters, the seller must either have no open mortgage on the property, or one that can be readily paid-off at closing. Traditionally, it's the buyer's financing that supplies the funds necessary to pay off a mortgage. With seller financing, there is typically only the buyer's down payment available at closing.
But when there is no open mortgage to worry about, then seller financing can certainly be a very viable option. The seller of course wouldn't benefit from an immediate payoff, but the seller would ultimately walk away with significantly more because of the interest that would be collected on the seller financing. Benefits for a buyer would be the lack of lender closing fees (i.e. origination charges, application and underwriting fees), or for buyers without the ability to obtain traditional financing - they would be able to get just that, from the seller.
Seller financing is not for everyone, which is why it doesn't happen very often. But when the pieces fit, and the need is there, seller financing can be a lifeline for a sale to go through.
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