SELL YOUR PROPERTY - ON YOUR TERMS
Is seller financing right for you?
- Interest payments each month – regardless of stock market performance
- No more expenses due to property upkeep, taxes, insurance, or unforeseen costs
- Tax Benefits – Defer your capital gains tax
- Sell or pass on your seller finance note
SELL YOUR PROPERTY - ON YOUR TERMS
Is seller financing right for you?
- Interest payments each month – regardless of stock market performance
- No more expenses due to property upkeep, taxes, insurance, or unforeseen costs
- Tax Benefits – Defer your capital gains tax
- Sell or pass on your seller finance note
How does seller financing work?
Seller financing (also known as owner financing, selling on a contract, and ‘carrying papers’) is a way of selling a property that cuts out traditional lenders. The seller acts as the lender for the portion of the purchase price that the buyer cannot pay up front.
There are two common types of seller financing
Contract For Deed
Trust Indenture
There are two common types of seller financing
Contract For Deed
The Contract for Deed defines the terms of the loan – The loan itself is secured by a ‘Note of Purchaser’s Interest,’ which is filed at closing. The deed itself stays in the seller’s name until the loan is completely paid off.
At closing, the seller signs a Warranty Deed A warranty deed is a legal document that guarantees the seller owns the property and has the right to sell it, and that the property is free from any liens or claims by others.. and the buyer signs a Quit Claim DeedA quit claim deed is a legal document used to transfer any interest a person has in a property to someone else, without guaranteeing that the property is free of debt or other ownership claims.. These documents are stored, generally with an escrow company.
When the loan is entirely paid off, the Warranty Deed (which was signed at closing but not yet filed), is filed, giving the buyer full ownership.
if the buyer defaults on the loan as per the agreement, the Quit Claim Deed is filed and buyer loses all interest in the property. Contract for deed buyer defaults do not require a traditional foreclosure process to revert title back to the seller.
Trust Indenture
A Trust Indenture is how most conventional home purchases (that require a loan from a bank) are secured.
At Closing, the buyer receives a Warranty Deed in their name, and the Trust Indenture secures the loan on the property. The Trust Indenture is a document that shows that the seller has a lien on the property until the loan is paid off.
The Trust Indenture will have the basic terms of the agreement between the buyer and seller (now, the borrower and the lender), and also lays out the basic terms of a foreclosure.
How are payments made and distributed?
how can I be sure taxes and insurance are paid?
To ensure the buyer keeps up to date with tax and insurance payments, most contracts require the buyer to pay prorated tax and insurance payments each month. the escrow company collects the monthly payments and pays the bills when they come due.
Both contract for deeds and trust indentures have terms that penalize lapses in tax and insurance payments with default.
Don't want to tie up your sale proceeds for decades? require a balloon payment.
How does a Balloon payment work? An example -
How does a balloon payment work?
Bob wants to sell his investment property for $500,000. He found a buyer who has a down payment of $100,000. He likes the idea of seller financing to defer some of his capital gains taxes and collect some interest over the next few years, but doesn’t want to finance the property for more than 5 years.
- A $400,000 loan amortized over 5 years comes out to $7548.49 / month – more than the buyer is able to pay.
- A $400,000 loan amortized over 30 years comes out to $2147.29 / month with a 5 year balloon payment keeps the buyer’s payment manageable while still keeping the timeline reasonable.
With this scenario, the buyer puts down $100,000 at closing and pays $2147.29 / month for 5 years.
At 5 years, the buyer must pay off the remaining $367,314.93, most likely by refinancing the loan with a bank.
Over the 5 years, Bob has made $96,152.12 in interest for financing the transaction.
Does an attorney need to negotiate a seller financing transaction?
Sellers and buyers should never discourage the other party from consulting an attorney if they feel the need, but the general terms of trust indentures and contracts for deed are often negotiated between parties with the help of a qualified facilitator like American Seller Financing.
For most simple transactions, American Seller Financing only uses attorneys as scriveners in writing Contracts for Deed. Scriveners take the terms that have been negotiated and write the final contract for deed without advising either party.
In general, if one party decides to use an attorney to negotiate, it is advisable for the other party to do so as well.
Seller Financing Made Easy
let's Get your deal done right.
You Have a buyer. You have a seller.
We put it all together.
2% facilitation fee,
an option of $0 due at closing
We facilitate the entire transaction – providing the terms, contracts, and contacts to get the deal done right.
Seller Finance-Driven Listings
2% Listing Fee,
an option of $0 due at closing
Our network of seller finance-driven listing agents understand the nuances of selling owner-financed properties. Selling for more, maximizing income, and presenting properties to qualified buyers.
Buyers searching for seller financing.
Most seller financing isn’t advertised. Our agents are experts at finding seller-financed properties and negotiating creative terms for the perfect deal.
