All about seller financing

by Rudden|Bobruska Team 08/13/2023

money image

Seller financing is an option for buyers and sellers to work together without a traditional mortgage. Also called owner financing, this type of financing involves the seller providing funding for the home in the form of credit. 

Since sellers are often more flexible with financial requirements than banks, this can be an excellent option for a buyer with subpar credit or other financial issues.

Here is some more important information about seller financing arrangements:

How does seller financing work?

In seller financing, the seller acts as the mortgage lender rather than a bank or financial institution. There are typically fewer closing costs involved and different requirements for home appraisals.

Types of seller financing agreements

Different types of agreements are available to fit a wide range of scenarios. The most common types are:

  • Land contract.
  • Assumable mortgage.
  • Lease purchase agreement.
  • Land loan.
  • Holding a mortgage loan.

Mechanics of seller financing

In a seller financing agreement, both buyer and seller sign a promissory note with the specific terms of the loan. The buyer pays the amount back with an agreed upon amortization schedule, usually with interest. A seller financing deal often offers the short-term option of requiring a balloon payment within the first several years.

Tips to reduce the seller's risk

Just like a bank or mortgage lender, you take a risk when offering a seller financing agreement. If the buyer defaults on payment, you could be subject to serious legal fees. However, there are some steps you can take to serious legal fees. However, there are some steps you can take to reduce your risk as the lender and seller:

  • Require at least a 10% down payment.
  • Use a complete loan application just like a traditional lender would require.
  • Work with a real estate attorney & knowledgeable real estate agent for help during the process.

Is seller financing a good way to sell your home? If you've paid off your existing mortgage, it can be a great way to make a sale in a tough market. However, many sellers would rather not take the risks. Ultimately, you'll have to weigh the pros and cons in your specific situation.

purple infographic

About the Author
Author

Rudden|Bobruska Team

Gary Rudden, Lisa Rudden, and Nick Bobruska  

RUDDEN BOBRUSKA TEAM

What sets your team apart from other real estate teams?

There is no team out in the market that offers what we do. All of us are Realtors, but

we each have specialized roles, which make our team so unique!

After decades of living and selling real estate in the DMV, we have established

ourselves as one of the top real estate teams with our market expertise and

cutting-edge technology. Our savvy high-tech marketing is on every website

and social media source. We have a huge network with other top agents, which

helps to premarket homes and discover homes for buyers before they reach the

open market. Our services include professional in-house staging services, broker

expertise in negotiating and navigating contracts, and buyer representation in all

price ranges. Each client has different needs and we create a marketing plan based

on those needs.

Our most distinct feature is our in-house construction and renovation team. We

are literally a full-service, one-stop shop when selling or buying a home!

How does the in-house construction and renovation team work?

All work is managed and completed through our licensed and bonded construction

crew. No need to call outside contractors. We are like “HGTV,” but we just don’t

have a show! Whether it’s a small makeover or a major renovation, we do it all. Our

sellers love this aspect of our team because we make preparing your home for the

market so seamless. Our buyers love the advice and insight we can give for future

renovations and repairs.

Having a licensed Maryland Home Improvement contractor as part of our team

along with the knowledge, experience, commitment and services that we offer, truly

puts our team as a vanguard in the real estate industry.