Seller Financing Might Not Be A Bad Idea: Part 4

Here are the pitfall of seller financing basically there are only two.

1. You might not get a good candidate.  As mentioned previously, you can get a loan agent to qualify your buyer/borrower to avoid getting into that situation.  Also, review the application yourself to get a sense of the applicant.

2. The borrower might not make the payments.  That’s the worst case.  You need to react quickly if the monthly payments don’t come in or on time.  You impose a late fee and if it carries into the next month.  Start foreclosure on the property.  There are companies to handle the paperwork or an attorney to get you through the process.  There will be costs and stress but you’ve got a cushion from the borrowers down payment.  The sooner you resolve the problem, if it leads to foreclosing, the sooner you can resell the property and find another borrower the finance.  The next time you’ll get a better borrower and get another down payment.

There is risk in every investment but with seller financing, the benefits outweigh the pitfalls.

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