Should you offer to front the money a buyer needs to purchase your home? It may sound a little crazy, but seller-assisted financing is a viable option for a lot of owners who need to unload their property and can't find a buyer quickly on the regular market.
With seller-assisted financing, you essentially become the new owner's bank. It's often done because a would-be purchaser can't qualify for a regular bank loan due to credit issues or problems with their income (like a short work history or self-employment). They may have the money for a downpayment -- but nothing else. Other times, buyers want more for a house than the bank is willing to approve. There are also situations where the buyer simply wants to unload the house as fast as possible, but a soft sales market makes it hard to find a ready buyer. Offering owner-assisted financing opens up new possibilities and taps into a market of buyers that may be ready to pounce.
But is seller-assisted financing right for you? Consider these points:
You are typically free to set your own interest rates, payment schedule and any consequences should the buyer default.
It's often cheaper to do because there's no bank, no title company (and maybe no realtor) involved in the process. Closing costs are also lower; there are no "points" or origination fees.
The financing period usually only lasts for a short while (typically five years and under). That gives the buyer a chance to straighten out their financing problems and get a regular mortgage.
But the picture isn't all sunny. While owner-assisted financing can help both parties out, there's always a chance that your buyer won't be able to fix their financial problems in the set time. You also suffer through a delay in getting your equity out of the home -- which may be an issue if you need it to relocate.
Before you decide to offer financing to a potential buyer, talk your potential real estate transaction over with an experienced attorney.