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The following, available in a pdf file, courtesy of
NoteWorld.com and Seniors Real Estate Specialist,
explains seller financing:
"In a seller-financed real estate transaction—also frequently referred
to as owner financing and seller carry back financing—a property
seller agrees to lend money to the buyer to purchase and close on the
property. In essence, the seller assumes the role of a banker, and
carries back the loan. The buyer sends regular payments, typically
monthly. A down payment is negotiated between the seller and buyer as
in any other sale. More than anything else, seller financing is
flexible. So there can be many variations on the way the loans are
structured and repaid."
"This flexibility allows the buyer and seller to negotiate the
interest rate, payment amount, late charge provision (if any),
interest and payment adjustments (if any), any call date
(balloon payment date), any acceleration clause, and other
provisions of the payment schedule that a buyer would typically
find it difficult to negotiate with a lender."
"In commercial lending, the borrower typically locates lending
programs with preset provisions and applies to qualify for the most
desirable set of terms. But in seller financing, there is true
negotiation. One party can trade any element of the terms in
exchange for the other party’s compromise on a different element.
It’s much easier than you may think. And once the transaction is
complete, your seller can easily and economically contract with an
account servicing provider to handle all the record keeping, as well
as the transfer of funds. And when they decide to cash out their
contract, that’s easy too. Direct them to NoteWorld.com for an
instant, no-obligation quote."
http://www.byowner.com/data/SRES_booklet.pdf
This process would be essentially the same whether you are buying
a home for yourself, or an apartment building as an investment.
The seller simply becomes your banker. S/he may maintain the mortgage
S/he currently has on the property, and pay it off as you make
payments to them, or they can own the property outright and act
as the lender as well as the owner. The main difference, as noted,
is that the possibility or greater flexibility exists, in the terms
of the loan, for both seller and buyer, by bypassing the bank.
The buyer signs a promissary note (essentially a contract to buy the
property according to the terms agreed upon by buyer and seller).
The seller can then sell the note for cash, or sell a portion of the
note, enough to generate whatever cash they may have immediate need
of, or can retain the note until the contract is fulfilled. This
gives the seller great flexibility in liquidating their investment.
The terms of the note would remain the same, even if it is sold,
so there is no risk to the buyer in this arrangement.
Another page which discusses this aspect is in this financial
services guide from Condor Funding:
http://www.financialservicesguide.net/realtors.html
And others:
A cached page from MyPrimeTime.com:
"The rewards and small risks of seller financing for retirement."
http://216.239.53.100/search?q=cache:sZTFtkd5BKwC:www.myprimetime.com/money/real_estate/content/sellerfinance/+%22seller+financing%22&hl=en&ie=UTF-8
From CCH Business Owner's Toolkit, regarding the seller
financing of your business:
http://www.toolkit.cch.com/text/P11_2510.asp
And a page from Owners.com:
http://www.toolkit.cch.com/text/P11_2510.asp
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Searches done, via Google:
"seller financing"
://www.google.com/search?hl=en&ie=UTF-8&oe=UTF-8&q=%22seller+financing%22 |
