Seller Financing is an awesome tool that can put more money in your pocket when you sell a property. Do you know how and when to use this tool? And what it can do for you?
In declining markets or uncertain times, banks and traditional lenders become more conservative and money gets tight; fewer buyers can qualify for the loan to buy a property that you want to sell. When that happens (even if interest rates stay low) the number of buyers for your property decline, time on market increases, supply increases, and prices begin to decline.
How can you move your property faster in a slow market without taking a hit on price? The answer is to offer Owner/Seller Financing. You realize three advantages over sellers who require full cash out at closing.
- You can structure a loan that meets the need of many more buyers who do not qualify for a bank loan. When the pool of buyers for your property increases, you sell faster! When a buyer is not accepted by the bank, your property offered with seller financing is in a much more limited pool of properties your buyer can purchase. You sell faster with less competition. You have the flexibility to approve buyers with credit below bank and lender standards. They may have high scores but a bankruptcy on credit, lesser score with acceptable collections, interrupted job history or are self-employed and still be a good repayment risk.
- Because you have more buyers that have fewer buying options, the demand for your property is higher. You can price at full market value or even at a premium price when prices are declining. It is no secret that home buyers generally look at how much home they can buy for the amount of monthly payment that they can afford. Price is not their primary consideration. You can realize more from sale of the property both in the form of higher price AND in the interest that you can collect over time on the sale. For someone that does not qualify at the bank you are able to charge higher interest rates. A coming article will discuss considerations that apply to setting interest rate on your loan.
- Normally you can also realize tax advantages with seller financing. Consult your accountant on this — it is often possible to distribute the profit over the term of the loan as an installment sale. This enables you to avoid a big tax liability in the year of sale, and the opportunity for tax planning over a number of years as the loan pays off.
Seller financing offers an even further exit strategy to real estate investors and businesses. There is an active market of buyers for these loans. You can sell some or all of your loan for lump sum cash. Contact Nationwide Secured Capital today to find out how. Contact Gene Powers with any questions 800-816-5856.