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
A contract for deed (land contract or installment sale contract) is a type of real estate sales agreement where the seller retains title to the property until the buyer has made all payments. When all the payments are made, the deed in the buyer’s name is filed.
Trust Indenture
Seller financing that uses a trust indenture puts the deed in the buyer’s name at closing. The trust indenture is a filed contract that states the terms of the loan, including the interest rate, repayment schedule, and what happens if buyer defaults.
Seller financed transactions use an Escrow CompanyA neutral third party company that collects and distributes funds, and files documents as directed by the contracts they are provided. . (usually a title company) to collect monthly payments from the buyer, usually along with a prorated monthly tax and insurance payments. The escrow company then distributes the funds to the seller, and pays tax and insurance bills when they come due.
Having a neutral company dispersing funds is vital – once the deal is in place, they follow the terms of the contract exactly, so the seller does not need to communicate directly with the buyer after closing.
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.
A balloon payment is a large final payment due on a loan before the loan term ends. In seller financing, this means the buyer pays off the remaining loan balance earlier than the full amortization period.
Benefits:
For Sellers: They get more interest over a longer time but can receive their money sooner since the loan balance is paid off early.
For Buyers: They enjoy lower monthly payments and have time to find new financing options before the balloon payment is due.
Example: If the amount financed is $500,000 at 6% interest, amortized over 30 years, but with a balloon payment due in 10 years, the buyer’s monthly payments stay manageable while ensuring the loan is paid off within 10 years.
You Have a buyer. You have a seller.
We put it all together.
2.5% 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
2.5% 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.