With the exception of cash-buyers, it is generally necessary for prospective home buyers to obtain a loan before being able to purchase property. While a bank often provides such a loan, thus acting as a kind of mediator between buyer and seller in the property purchase agreement, an alternate option for independent sellers in Brevard County is to offer potential buyers seller financing.
What is Seller Financing?
Seller financing refers to a loan that is provided by a seller to a buyer, with no involvement from a bank. This kind of financing places the weight of responsibility on the shoulders of the seller, who is responsible for taking care of all financial negotiations and official purchase agreements. The method of loan repayment is up to the seller; often, sellers prefer to draw out the installments over a longer period of time, since this reduces the financial gains reported on their taxes, and thus reduces the taxes they owe.
There are a variety of advantages to offering seller financing in Brevard County. When a seller has complete control over the financial agreement, he or she can ask for a higher purchase price or a higher interest rate. When buyers do not have to go through the process of applying for a loan (and when they can avoid the closing costs that typical corporate lenders provide), they are often more willing to pay a larger down payment or pay more in interest.
In addition to the financial benefits of seller financing, this option also streamlines the selling process overall. When a bank or other lender is in charge of the financing, it may take much longer for a loan to be approved. An independent owner offering seller financing in Brevard County does not have to wait on a third party and can therefore close a deal much more quickly. Moreover, some lenders require permission to inspect the property before they will grant a loan to buyers; seller financing removes this step, speeding up negotiations and preventing sellers from having to conduct repairs or renovations.
Potential Drawbacks and Caveats
Of course, it is important to acknowledge that there are a number of potential disadvantages to this option. For instance, it can be risky to close on a purchase agreement without the financial and legal backing of a bank. A buyer hoping to hide a poor credit history might not offer up all of the details of their financial history to a seller, and thus a seller might unwittingly offer seller financing to someone who is actually unable to repay the loan.
Keys to Successful Seller Financing
To avoid being scammed or losing money to a poorly qualified borrower, sellers should carefully evaluate all of the risk factors involved in the potential sale. Those offering seller financing should ask for official credit reports from all buyers, and should consult with legal and financial experts before drawing up an official purchase agreement. It is also advised that sellers do not waive down payments as an incentive for buyers. If a deal goes belly-up when a buyer cannot repay the loan installments, sellers will want to have obtained a hefty up-front payment at the very least to cover any expenses for cleaning, repairing, renovating, and re-listing the property.
On the whole, seller financing offers independent sellers more control over the sale itself. While some might see this option as a bit more work because sellers have to manage the financial details and loan contract, many believe that the benefits far outweigh these drawbacks. Thus, those looking to quickly and privately sell property in Brevard County might want to seriously consider seller financing as a viable option.