What Is Seller Financing Real Estate?
Today I’m answering your question, “What is seller financing real estate?” This can make all the difference between success and failure in the real estate business.
Financing is so important for real estate buyers and sellers, and the United States revolves around installment payments.
Once in a while, someone will pay cash for a car, or even a house; however, 95% of all vehicle purchases are installment sales. Even closer to 100% of real estate involves installment sales.
Surprisingly, this process of seller financing real estate can change the whole business for many who are starting small and want to grow big.
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Grow Your Real Estate Business Quickly With Seller Financing
So what is seller financing real estate? I’m going to create a case study which will give you many of the details and knowledge that you need to understand seller financing.
I have a student who is very successful at creating seller financing, and he started small and grew quickly. As a matter of fact, he completed dozens of transactions.
He started with the auction process and then he struggled trying to sell the properties because he didn’t understand that the buyer he was looking for wanted a bargain.
Once he understood that the buyers in his market wanted bargains, he changed his approach.
First, he bought at the auction at low prices, sometimes 60%, 70%, and 80% discounts.
Now, he simply had to sell a little lower than the normal pricing and buyers were attracted to him. The surprising part of all this is that he had very limited money.
How to Seller Finance Bargain Real Estate
Tax defaulted property auctions are conducted in all counties in the United States at least annually, and in some states, they are conducted monthly. Most of the guesswork can be eliminated with research.
My student, using a credit card, purchased from the auctioneer at absolute bargain prices. Research proved to him that each auction had many properties under $100,000, and this opened up a huge market for him.
For the newcomer, the bargain properties were selling for $5,000 to $10,000, and they had values of $50,000, $60,000 and $75,000. Obviously, these were not country club properties.
My student is willing to discount the properties from the retail price to the wholesale level and also willing to take installment payments.
Here’s someone who has adapted to the market. No one knows what will take place at the auction. You must adapt to whatever it is they have for sale.
The Benefit of Seller Financing Inexpensive Properties
Because this is a unique market, the little guy, newcomers and entrepreneurs have a huge advantage. There is nothing standard about the deal. Success comes to the little guy because he understands what you are going to learn right now.
The little guy attends many auctions. In some states, there are at least 65 to 75 auctions a year, and properties valued at less than $100,000 are sold at 60%, 70%, and 80% below market.
Banks don’t want to loan on these properties, and this gives you a huge advantage.
Offering to Seller Finance Credit-Challenged Buyers
The 25% of the market that doesn’t qualify for an institutional or bank loan is looking for financing, and they have very little concern about pricing. They need a place to live.
They have recently been divorced, bankrupted or suffered some other calamity, have low FICO scores and are untouchable by the banks.
These are perfect clients who are really looking to bargain for price or interest rates, and they’re willing to make long-term commitments to get low payments.
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How Does Seller Financing Work?
What is seller financing real estate? Let’s review. We’re buying low at the auction. When we make the correct purchase, we have margin between the purchase price and the market price.
If we sell at less than market, we will attract many possible buyers. Additionally, if we advertise installment sales, we will have more buyers than we can accommodate.
My student, even using a credit card, is insightful. He understands there’s a huge market for selling. Small investments from a credit card can pay large dividends.
A property with a $75,000 value is not exciting for the banker, however, the buyers for these properties have lived in and grown up in these neighborhoods.
The tax auction is recycling defaulted property back into the marketplace. The potential purchaser is more interested in the down payment and the monthly payment than the purchase price.
Profiting From Seller Financing
Advertising seller financing attracts literally dozens of purchasers.
It’s not unusual for auction buyers to purchase these properties for under $10,000 and resell them for $50,000 or $60,000 by accepting a $5,000 or $10,000 down payment and not using any credit checks, brokers, bankers, appraisals or home inspections.
If we do the math, these properties will make the seller huge profits.
How to Structure a Seller Financing Deal
Here’s an example. A property with a tax assessed value of $75,000 is purchased at auction for $10,000. My system is to buy low, sell low, and do it fast. The student sells for $45,000.
Here’s how the seller financing in structured
- Selling Price $45,000
- Seller agrees to make payments $500/month + taxes and insurance for 10 years.
- 10 years = 120 months x 500 = $60,000.
- Balloon payment of $5,000.
- Down Payment is $5,000.
- Total from Customer $70,000.
$60,000 in profit is not bad on a $10,000 purchase.
What is seller financing real estate? An excellent way to make quick sales and big profits.
We hope you enjoyed Ted’s lesson, “What Is Seller Financing Real Estate?”
Seller financing enables you to sell properties that banks aren’t willing to finance to a large pool of buyers, credit-challenged people who don’t qualify for bank mortgages.
It’s also enables the seller to profit from both the sale price and the financing, sell the property quickly and earn residual income for years.
If you’d like to know more about tax delinquent property investing, Ted Thomas provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops, web classes, and personal coaching with certified coaches.
You can learn how to reap the huge rewards from tax lien and tax defaulted property investing! Get started today by taking advantage of Ted’s Free Master Class! Act now, it costs you nothing and will give you a big head start!