According to Investopedia, “Seller Financing is a real estate agreement in which the seller handles the mortgage process instead of a financial institution. Instead of applying for a conventional bank mortgage, the buyer signs a mortgage with the seller. Owner financing is another name for seller financing. It is also called a purchase-money mortgage. “
Can Seller Financing With a Mortgage Be Done?
The answer is yes. The seller can accept payments on a home and let’s say the seller owes $150,000 to the bank. The seller could accept payments and pay a share of the payments to the bank and now the seller is also a bank.
For example, $150,000 loan with a $1,000 payment could easily be make if the seller sold the property and received $2,500 a month in payments, on the $300,000 property.
If you purchase a property at a tax defaulted auction with a huge discount, you could sell the property with installments and gain not only a profit but monthly payments for a decade or more. Or you could maintain ownership and rent the property and take that money to buy other properties or obtain a bank loan like the insurance company.
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Will Banks Agree?
Banks become flexible and do so when sellers accept payments from buyers because the banker wants to make sure they don’t get involved in a foreclosure. So, let me explain…
You the seller sell your property for $300,000. The new buyer does not qualify with the bank. However, the buyer has a good job, husband and wife, they are newly married. They can afford the payments of $2,500. Your payment is only $1,000. Banks do not like this arrangement.
However, if your payments are on time, in most instances, the bank, if they discover what you’ve done will look the other way. Because their attitude is the loan is not in default.
Most bank loan documents will have a clause that states “…due on sale”, which simply means when you sell your property, they want all their money. Thousands of sellers do not inform the bank of the sale. And they sell their property and receive payments more than that is owed to the bank.
For sure that is happening every day and it’s impossible for the banks to police the situation. At the end of the day, the bank has little or no risk. However, they would much prefer to be paid off, put a new loan in place to make fees and other income.
This is an alternative that is used throughout the industry. For sure, there are many alternative ways to finance real estate. The ability to be a problem solver and have great flexibility makes you a deal maker. Properties are purchased every day with small loans in place and the loans remain in place because the payments are so low.
The tax lien and deed business opens many doors for new real estate investors. And the new real estate investors can then open many doors for those with low credit scores, those who have been recently divorced or have cleared the process of bankruptcy. These credit challenged buyers make up a significant part of the market which could be 20% or 25%.
Learning how to do Seller Financing is very profitable. Loans can be made at very low down payments, very low payments with a huge balloon for the last payment. Real estate is permanent, it can’t be moved. It generally moves in cycles it will go up and it will go down. If you buy right, at the auction or in a down market, you have huge opportunity.
If you’d like to get started today, you can begin now at no cost by taking advantage of Ted’s FREE Master Class. It’s only about 1 hour of streaming video and will open your eyes to the incredible opportunities available in tax delinquent real estate investment.
If you’ve decided it’s time to take charge of your financial future, then this Free Course is the best way to get yourself started on the road to success!