THE PROS AND CONS OF SELLER FINANCING

 Seller financing from two perspectives - the buyer and seller.

Pros From a Buyer Perspective

Pros of seller financing from the point of view of the buyer:

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  Easier qualifying – The seller still has to trust you but typically less paperwork and hassles than a bank loan

      
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  Everything is negotiable – Unlike with a bank or conventional lender who says take it or leave it

      
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  Lower interest rate (potentially) – Especially compared with commercial or private financing

      
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  Lower down payment (potentially) – I have negotiated between 0% to 10% down

      
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  No personal guarantee (potentially) – With most loans, you pledge ALL of your personal assets in case the lender loses money. This can often be removed from seller financing contracts so that only the property is security for the debt.

      
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  Faster, simpler closing – You avoid layers of bureaucracy, delays, repetitive processes, inspections, and appraisals

      
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  Potential discount on the loan balance – Sometimes the seller or the heirs need cash. As a result, they may be willing to let you pay off all or part of the loan at a discount in exchange for a lump sum of cash. I have had this happen a few times.

      
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  Valuable relationship for more business – A former coaching client of mine bought one property with seller financing. The seller later sold dozens of other properties to my client because they demonstrated their competence and trustworthiness. Similarly, you may also be able to get future private loans from the seller.

      

Cons From a Buyer Perspective

Here are the cons of seller financing from the point of view of the buyer:

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  Everything is negotiable (!) – Although this is a pro, it’s also a con because you need to learn what terms to negotiate. There is a learning curve. I’ll give you some ideas later in the article, but I also recommend using a competent local Realtor to help.

      
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  Harder to negotiate – Seller financing requires patience and some skill to negotiate, but you’ll have to throw out most traditional investor tactics and haggling that pit you against the seller.

      
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  Issues with heirs – If the original seller dies, you will be involved with the estate and the heirs. You have a secured contract, so this doesn’t have to be a bad thing. But it may involve more hassle and communication than with a bank loan (although there are opportunities – like the potential discount I mentioned above!)

      

David Wyrick REALTOR /Leasing Expert

214-930-1642 
David@modernlivingdallas.com
www.DavidsRealtyServices.com