Seller Financing, also known as Owner Financing, is a real estate agreement in which the seller, or land owner in our case, handles the loan process with the buyer instead of a bank or institution.
Though not all sellers will be willing—or able—to provide financing to the buyer, it should still be considered as it is a great way to buy a property, while also simplifying the closing process for all involved.
It is recommended that both parties in a seller-finance deal hire a real estate attorney, or a real estate agent to review any contracts as well as the promissory note. Finding someone who is very familiar with seller financing, as well as the area you are buying/selling where there could be potential regulations, could save a lot of headache long-term.
After the buyer agrees to use seller financing, both parties sign a promissory note. This note is a written and signed promise to repay an agreed upon sum of money in exchange for financing. A promissory note typically contains all payment terms such as (but not limited to): total amount, interest rate, payment schedule, as well as default consequences.
These deals are often short-term (5-8 years), with many requiring a balloon payment at the end of the term.
During the designated terms, the seller typically HOLDS the title to the property until the loan is paid in full or refinanced to another lender. This is known as a contract for deed.
Check out our YouTube video below, where we are joined by Eric Scharaga, a notable figure in the land investing world, specifically in the realm of seller financing where he has been mastering the process since 2016.
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