MORE Seller Financing: Seller Financing Explained

If you’re looking to buy or sell a house, there are several ways to do so. For sellers, most of them involve extensive preparation and marketing efforts as well as lofty tax implications once the property sells. At the same time, sellers are at the mercy of the local real estate market at any given time. That means they could end up selling their properties for far less than they’d hoped or waiting for months or years for the property to sell at all. For buyers, conventional purchasing options mean looking for just the right loan to meet their needs, dealing with inflexible loan terms and conditions, and battling exorbitant interest rates to name a few challenges. 

One alternative that people on both sides of the fence often overlook is seller financing with help from companies like MORE Seller Financing. Though this process has some similarities to conventional buying and selling options, it also has several differences. Seller financing is largely misunderstood in the world of real estate, but you can read on to gain a clearer understanding of how it works. 

Paying Directly to the Seller

In conventional real estate transactions, buyers secure financing through a bank or other lender. From there, the money from that loan is passed along to the seller. In exchange, the seller transfers ownership of the home to the buyer. Then, the buyer makes monthly payments to the lender to repay the loan and the interest it accrues over time. 

With seller financing, the buyers and sellers work directly with each other. The seller essentially agrees to finance the home but doesn’t actually give the buyer a loan. Instead, the two agree on an overall price and work out the terms of the agreement. They decide how much each monthly payment will be and for how long those payments will be made, and the buyer makes payments directly to the seller.

 

Setting a Down Payment and Interest Rate

With a few exceptions, most traditional home purchases require a down payment. It can range from 3 percent of the purchase price of the property to more than 20 percent depending on various factors. For a home that’s worth $400,000, a down payment could range from $14,000 to $80,000 or so.

Down payments are usually required with seller financing as well, but they don’t necessarily have to conform to the norm. Sellers can decide how much of a down payment they want from buyers. In some cases, sellers are willing to work with buyers on the down payment to help make buying a home easier and more affordable for them. 

Sellers can choose the interest rates they want to charge as well. Some opt to charge lower-than-average interest rates to appeal to more buyers. Others may charge higher interest rates than the market average, but there are regulations in place to prevent them from charging excessively high interest. 

Choosing Seller Financing Over Other Options

Seller financing can be a beneficial arrangement for both sellers and buyers. Contrary to popular belief, it’s not a shortcut or an easy way out; it’s a well-planned strategy that allows people to bypass some of the disadvantages of the conventional real estate market. It’s a perfect solution for buyers who are looking for more flexible terms than traditional lenders can offer and for sellers who want to reach a broader market and sell their properties on their own terms.