How are homeowners becoming the bank?
Written by: Evelyn Garcia
Edit by: Akemis Ortiz
Seller financing or owner financing is what makes this possible. Instead of having the new buyer take a loan from the bank, why not take a secure loan from you instead? You become the bank. You will have a recorded lien on the property on your terms. You can get very creative and the more creative you get, the more money you'll be able to make than a traditional sale of your home.
When you decide to sell your home, you want the top dollar, right? Then you realize that some repairs need to be made. You know that if you make these repairs, the house can sell for the retail price you want. Though, you don’t want to go through this heavy mess of construction and live there as well. Here's the scenario. Your house is worth $100,000.00 as-is condition, but you need $150,000.00 to move down to the beautiful weather of Florida. However, the property needs $50,000.00 in repairs. If repairs are done, then the house can sell for about $250,000.00. If you wait to sell the house for $150,000.00, later you will be able to make more than $150,000.00. By getting creative and coming up with your terms of interest, plus even a balloon payment of $65,000 to $75,000, you are making more than $150,000.00.
Here are some pros to seller financing:
Can sell "as is": Potential to sell without making costly repairs that traditional lenders might require.
A good investment: Potential to earn better rates on the money you raised from selling your home than you would from investing that sum other ways. Another way is selling the promissory note to an investor, providing you with a lump-sum payment right away.
Lump-sum option: Can have a large balloon payment at the end.
Retain title: If the buyer defaults, you keep the down payment, any money that was paid, plus the house.
Sell faster: Potential to sell and close faster since buyers avoid the mortgage process
The possibilities are endless, despite some potential cons to seller financing as well, just like any investment.