It is very important when you are considering using seller financing, that you know the real benefits of doing so. If you are in need of major cash now, seller financing is not the best option for you.
However, if you really prefer this method over the others, then here are some great tips that you can use to make sure that you get the best deal possible for your home. The top 10 tips for seller financing are:
Down Payment: Whenever you can, you should force a down payment of at least 10% to 20% which will help to make it less possible for the buyer to default on you.
Check Buyer’s Credit before you sell to them: You should always require the buyer to complete a credit application and be sure to get an up to date copy of their credit report before you sell to anyone. Poor credit may mean that you will get a larger down payment to protect your property.
Settle on Repayment Terms: All of the terms of a seller financed business act are negotiable between the buyer and seller at their own risk. How the contract is defined is going to decide how it will directly affect the cash value of your contract. Under normal circumstances, the higher the interest rate that you apply for, and the shorter the term, the better the cash value of your contract will be.
Title Insurance: Any time that a person sells or buys, you should obtain title insurance. This is how you will identify any information that has been recorded against your property that could affect your lien priority.
Due on Sale Clauses: This clause will help to ensure that you will be paid completely if your property is resold. Instead of getting a due on sale clause, this one will require that any assumption of the buyer’s interest is subject to your written consent before anything is sold.
Taxes: You have to fully review the contract you create so that you can make sure that it contains a clause that forces the buyer to maintain adequate insurance on the property while he/she owns it. You should also make sure that the contract should specify the buyer’s responsibility to pay real estate taxes after the deal is closed.
Mobile Homes: If the property you sold happens to have a mobile home, you will have to contact the local Department of Motor Vehicles so that you can be sure that you have the proper documentations to transfer the mobile home title.
Closing Agent: You should always use a licensed third person to close your transaction for you just to be sure that it is done properly.
Payment Collection Agent: if you are smart, you will hire a licensed escrow company to manage your real estate contract. They will calculate the principle and interest for each payment, send out monthly statements, deal with reserves for taxes and insurance, IRS reporting, and document safekeeping. It’s just smart.