What is Seller Financing?

How Seller Financing Works

Every situation is different when it comes to seller financing, depending on the priorities of the sellers and buyers. Below is how seller financing typically works, with most situations following these steps:

  1. Buyer and seller decide on doing a seller financing agreement and discuss terms (down payment, interest rate, duration of loan)
  2. The seller decides if would like to move forward with the buyer
  3. Property inspections
  4. Time to negotiate and finalize the contract
  5. The contract is signed
  6. The buyer take possession of the house.

This process is much faster without the bank involving many underwriters, loan officers, and legal departments. The buyer and seller are the only two parties present, making seller financing a cheaper and faster option for selling a home.


The Advantages of Seller Financing


Consistent Cash Flow


It’s A Lot Quicker

There’s no need to wait for the bank’s approval for the mortgage with seller financing, making the entire process much faster. In the end, it’s a win-win for everyone. The seller receives consistent payments, and the buyer receives their home sooner.


Fewer Restrictions

Since the seller is the lender, there aren’t as many restrictions as there are with a traditional mortgage. There are fewer hoops to jump through for buyers to secure the new home, whether that is credit scores, income level, or work history.


More Affordable

Seller financing becomes a very affordable option for sellers when the banks aren’t a part of the equation. The many fees the bank charges can quickly get out of hand when it comes to selling a property, making it expensive with so many parties getting their cut of the pie.


A Great Investment

It’s not uncommon for some sellers to eventually become real estate investors. Although seller financing isn’t the most typical path, it can still be a very profitable one. In some cases, sellers can charge higher interest rates to help cover their mortgage with some cash leftover.

With no involvement from the banks, seller financing provides a lot of flexibility and a lucrative option. Many sellers turned investors find that using seller financing can be a great way to  save lots of money and negotiate better mortgage rates for themselves.


3 Ways of Selling a Seller Financing Property

1. Real Estate Listing Websites

Most real estate websites have a filter option for “seller will carry or owner/seller financing”.  If you’re a seller looking to find buyers, posting your home on all major real estate listing websites is a good idea, as most buyers are actively using those sites.

2. Connect with Real Estate Agents

Real estate agents and brokers have a wealth of information, and it’s pretty likely they know several buyers who are actively looking to break into the real estate market. It pays to network as much as possible; who knows what’s around the corner.

3. Search For Sale by Owner (FSBO)

Putting a “For Sale by Owner” sign right on the front lawn is one of the easiest and sure-fire ways to get attention from serious buyers.


Determining A Buyer’s Trustworthiness

Trust is crucial for seller financing; many sellers want to ensure that they’re dealing with an honest, reputable buyer. A good rule of thumb is to be transparent when discussing credit scores, employment history, and income levels for any buyers out there.


Seller Financing with HonestDeed

For many buyers and sellers out there, seller financing might be the answer. Whether you’re looking to buy or thinking of selling your home, at HonestDeed, we’re here to help buyers and sellers get the most out of every deal.