Henderson real estate terms | What is Seller Carried Finance?

What is “Seller Carried” Finance?

Seller carried financing is when a seller agrees to accept payments from the buyer instead of the buyer going to a 3rd party lender. In this case the buyer would make payments directly to the seller instead of a bank or lender. Seller carried financing can be adjusted to better benefit both the buyer and the seller. For instance if a buyer had enough cash for half of the listing price, and was selling their own home and would come up with the money after their home sold, they could write up an agreement with the seller that they would give the seller half of the money at the close of escrow, and the other half when the buyer’s house sells.

A buyer could also make monthly payments to the seller like a traditional loan. Whatever both the buyer and seller agrees to as far as financing, it is possible to write a contract for. There is also no conditions on what kind of real estate transaction qualifies for seller carried finance, it could be used on a condo sale, home sale, commercial sale, etc.

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Benefits of Seller Carried Finance

One of the most significant benefits is the ability to adjust the loan terms so it fulfills both the buyer’s financial abilities and the seller’s financial requirements.

If the seller is selling a second home and will be using the money for income, it may be best for them to get a monthly mortgage check from their buyer and be collecting interest. In the long run, if the seller decided to finance, they will be getting more money for their home with the additional interest being paid by the buyer.

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The buyer can also benefit from seller carried finance as a seller may be more flexible in the loan’s terms than a bank or professional lender. They may save money on mortgage fees and may be able to opt out of a home appraisal as well, this could be over $1,000 in savings before escrow even closes. Other benefits such as a low down payment or no down payment and reasonable interest rates is possible if the seller agrees

Modern Limitations

Over 25 years ago, seller carried financing represented just under 30% of residential real estate financing. Though it significantly dropped in popularity within the last 20 years, more and more people are finding it is a great option for them. As seller carried financing is becoming more and more popular, there have been more modern limitations placed on these loans. The main limitation is that a Licensed Mortgage Originator must approve seller carried loans. The primary thing that a Licensed Mortgage Originator is looking for is the buyer’s ability to repay the seller. This is a good limitation as it protects the seller from entering into an agreement with someone who cannot pay them. A Mortgage Originator must also ensure that the underwriting process is done correctly.

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Though there are restrictions, it has been found that many more people qualify for a seller carried loan than a conventional loan, and that there is a significantly smaller percentage of defaults with seller carried loans than conventional loans. These loans also ensure that the escrow process is faster. Usually sellers can sell the home for over 5% more if they carry the loan, and some sellers can get away with raising the price up to 15% if they carry the loan themselves.

Does all this sound familiar?

There are many different names for seller carried finance as there are many different ways that a seller can finance a loan. “Lease to own” may be one of the most popular terms, but there is also “First party finance,” “Installment agreement,” “Contract for deed,” “Land trusts” and more. If you are a buyer or seller, and are interested in this kind of financing, contact your local Henderson, Las Vegas, or Boulder City real estate agent at 702-509-1446!

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Real estate agent approved

Many real estate agents in Nevada and California love seller carried options. They have found that, depending on the situation, it can significantly assist both parties in a given real estate transaction. It can also make the purchase process much less stressful on both parties involved. Though seller financing is a great option, it is not always the best option. Be sure to discuss seller financing with your local real estate agent, such as the Klinger Group 702-509-1446, to discuss your options and what works best for you. You also may want to contact other experts when thinking about seller carried financing, and the Klinger Group will be able to get you in contact with some other local experts to help you make a well informed decision when buying or selling a home in Henderson, Las Vegas, or Boulder City.

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