Seller Financing 101

Let's Look at the Pros and Cons of Seller Financing

Seller financing allows the buyer to pay the seller in payment installments instead of having to qualify for a loan. As a result, the seller becomes the bank with a negotiated total price. The buyer then makes payments to the seller. Why would a seller choose seller financing? Seller financing allows the buyer to pay off the negotiated price of the property over time, with a similar or lower interest rate than a bank.

Advantages of seller financing:

1. Sellers have an increased likelihood to sell their property. In BizBuySell’s 2015 nationwide survey of business brokers, 82 percent called seller financing either "important" or "essential" to completing transactions in today's market.

2. Additional profit from interest rate is acquired.

3. Sellers can ask for a slightly higher asking price to help offset the risk of financing.

4. Seller financing allows the buyer to pay the seller in payment installments instead of having to qualify for a loan. As a result, the seller becomes the bank, The total price is negotiated, and the seller becomes the lender as opposed to a bank. The buyer then makes payments to the seller.

When considering seller financing, there are 4 things to determine: total price, down payment amount, term of the loan, and interest rate. Because these are all negotiable, seller financing proves to be a flexible and creative option as down payment, interest, total price, and loan term are all determinable factors.

If you are in a position where you cannot qualify for a loan, seller financing is the way to go. With seller financing, you can qualify for anything. What it really comes down to is, negotiation.