Here’s another perspective. Anyone considering selling right now with low or no loan amount will be silly not to consider this option.
- When to seek seller financing (iowabiz.com)
Either a refinance or purchase loan requires a full appraisal by a licensed appraiser. Sometimes the value on an appraisal is different than what the borrower is expecting usually less than the borrower needs to get a loan. Becoming an appraiser is not that easy. Basically there are courses to pass, 2,000 supervised hours to complete, appraisal tests to pass to become licensed and more to be certified. Every few years they need to complete continuing education. There are professional memberships to join, and criteria set up by its professional association and lenders. Some unhappy borrowers want to dispute the value on a property established by an appraiser and generally cite Zillow or some other website, a real estate agent or note a home sold in the area they know about. Given the fact it generally takes 5-8 hours to complete an appraisal and all the comparables need to be explained, the unhappy borrower has no merit. If a borrower is unhappy with an appraisal they should pay for another appraisal, another appraiser will work within the same guidelines required by the lender of the loan the borrower intends to qualify for to establish the value. Chances are, the new appraiser will come close to the same value as the first.
Reverse mortgages can be a solution for some homeowners in retirement and need cash usually for medical costs. But if a person is in good health, seller financing should be a consideration as well. If the property has a small loan or no loan, the equity can be set up to finance a buyer and allow for a steady income to supplement the seller. If a buyer is qualified to purchase the home it would be almost impossible to have a problem with the buyer. The main reason for this is the area we live in is one of the best in the country for stable home prices since our economy is stronger than most areas. Sellers believe it and buyers do too. It’s as simple as that, my job make sure a buyer is qualified to participate in the purcase.
One of the concerns sellers have against seller financing is a buyer able to refinance and paying back a loan soon after closing the sale. You can make sure there’s a prepayment penalty in the note to prevent most buyers to pay early. There are limitations to what the note holder can charge and for how long.
Every situation involves risk and the risk risk of the borrower paying the note quickly, is not a risk but a tax liability, so the worse situation is paying taxes on the payoff but the longer the buyer pays, should offset a lot of that tax burden. If that happens consult your CPA or tax expert.