Seller Finance: How You Can Buy a Home Without a Lender (Episode 79) S6:E4

Seller Finance is one of the most versatile methods to purchase (or sell) a home. It takes outside-the-box thinking, but it can afford a lot more flexibility to both the buyer and the seller.

0:00 – Introduction. Seller Finance 101, or maybe even more basic than that. This is a high-level overview of seller finance. The most basic definition is that a seller is financing the property…not a lender. Lease Option, wrap-around mortgage (seller has an existing mortgage, and the seller writes a deed that encompasses the mortgage), contract for deed (like buying a car: buyer doesn’t get title until the loan is cleared — it’s biased in favor of the seller), all inclusive (buyer’s name is on title — it’s biased in favor of the buyer).

5:45 – Due on Sale. A due-on-sale clause is a clause stipulates that the full balance of the loan may be called due upon sale or transfer of ownership of the property used to secure the note. The lender has the right, but not the obligation, to call the note due. Title and recording are especially important. Simplest form of seller financing is when the seller owns their property outright (there’s no bank to care about the “due on sale clause”).

7:56 – Concerns. It depends on what the buyer and seller are concerned about. Divorce presents a really hard circumstance for a traditional lender: you have an outstanding, unknown debt — lender can’t give you loan until it’s resolved. Timelines are typically shorter than traditional mortgage (though that’s not required). If the seller has a low interest rate, and then finances a buyer at cheaper-than-market rate that’s still higher than the seller’s rate, they are making money on “the spread” between the interest rates. (This is how bank’s make their money, btw: they loan at higher interest than their deposits are paying. The spread constitutes revenue.) Structure the note to be time-flexible with conditions.

11:57 – What About Buyers? Less documentation concerns. Combined down payment funds from multiple sources is untouchable by a lender. Not so in seller finance.  Cash on hand can be a concern for the buyer in traditional lending, but it’s not an issue in seller finance. Very time flexible for the buyer. The terms are VERY customizable. Investment properties see a lot more seller finance.

14:45 – Make Nice With Your Attorney / Title Officer. There are a lot more pitfalls, but that doesn’t make it bad. You can still build protections into the terms for the buyer and the seller. Make sure the contract sets clear expectations (and handles less-expected situations).

16:18 – What’d We Learn Today?

18:11 – Out Takes

 

* No lenders were harmed in the making of this video.

Please contact us to tell us you love us, you want to hire us! Call or text:

 

Realtors with Hive Collective at Presidio Real Estate:

Tyler Cazier: 801-210-0230

Aric Wiszt: 801-228-7687

 

Lender with Elite Team at Security Home Mortgage:

NMLS: 178787

Jason Christiansen: 801-669-7271

NMLS: 240472

 

A Production with Security Home Mortgage's Jason Christiansen, and Hive Collective at Presidio's Tyler Cazier and "Mr. Suit" Aric Wiszt.