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Feature Article
Sweet Seller Terms!
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Feature Article by Realtor Roy Widing
When housing markets turn
difficult, creativity turns lemons into lemonade.
One sweet
power-packed technique goes by names like 'seller terms,' 'owner
terms,' 'seller financing,' or 'seller
carryback.'
What Are Seller Terms?
Seller
terms involve a buyer making house payments to the seller instead
of a bank. With seller terms, a buyer makes an initial down payment
of perhaps 10 or 20% of the purchase price to the seller,
followed by monthly payments applied to the balance owed. Interest
rate, payoff date and other terms are mutually agreed upon by buyer
& seller prior to
closing.
Why Consider Seller Terms?
For
Buyers: In our
current economic climate, banks have made it harder to get a home
loan. Unless a buyer's income, credit & down payment are
strong, lenders can be notoriously difficult. These factors, plus
the fees banks charge are reasons some choose to avoid traditional
lenders.
For Sellers: Offering
terms enlarges your 'buyer pool' of possible purchasers, giving you
more buyers for your property. And by making it easier to buy,
you're providing added value. This helps when negotiating, and
often shortens a home's market time.
Savings, Too
When a seller 'takes payments,' this can eliminate costly charges
required by traditional lenders. Appraisals, loan fees,
underwriting fees, doc prep fees, processing fees...these can go
away when a buyer makes payments to the seller. As a result,
buyers have more money to use as a down payment, or for
furnishings.
Are Seller Terms
Common?
Seller financing is more routine in a 'down' market. Over the past
year or so, nearly half of the home transactions I've handled as a
Realtor were either some form of seller financing, or cash...neither requiring a traditional
lender!
Seller terms are easiest when a seller owns the property being sold
either 'free & clear' with no loan remaining, or with plenty of
'equity' which means there is only a small loan balance to pay off.
Otherwise, if there is a substantial loan remaining on the property
being purchased, the lender who holds the loan on that property
likely has a 'due on sale clause.' That means the lender must be
paid off if the seller sells. Because a much larger down payment
is then necessary, this situation hampers the option of seller
terms.
Other Considerations
For sellers, receiving a substantial down payment is a key factor
to decrease the likelihood of later problems. A buyer's large down
payment makes foreclosure much less likely due to
non-payment.
Fire
insurance and property tax bills are typically paid by the
purchaser, so it's important for the seller to receive receipts of
payment from the buyer. Some sellers like to review a buyer's
credit or financial statement prior to selling with terms.
Questions?
Contact me anytime. I routinely handle real
estate transactions with seller terms.
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Choppy market waters? Captain
Roy to the
rescue!
Real Estate Life Preservers
Here
My 22
years of real estate experience can save you time, money and
worry. Whether you're buying or selling, contact me
today!
Sincerely,
Mobile Phone:
(503) 470-0201
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