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Seller financing

Instead of getting all your money at closing, you act as the lender and I pay you over time. It fits a narrower set of owners than people think, and here's why.

Who holds the house and your money in seller financing
  • The house, today (you hold it): Yours
  • The house, at closing (I hold it): Deeded to me
  • The house, later (I hold it): Mine
  • Your money, today: None yet
  • Your money, at closing (you hold it): A down payment
  • Your money, later (you hold it): My monthly payments on the note until it's paid off

Any existing loan is paid off or brought current at closing.

How it works

  1. You tell me about the house, what you owe on it, and how far behind you are.
  2. If it fits, I make a written offer with a price, a down payment, a monthly payment, an interest rate and a length of time.
  3. At closing, the house is deeded to me, and I sign a note promising to pay you on those terms, backed by the house.
  4. I pay you every month until the note is paid off, usually when I sell or refinance.

One form of seller financing is a contract for deed, where the seller keeps legal title until the buyer makes all the payments.

Who it fits

  • You own the house outright, or you owe very little on it compared with its value.
  • You don't need all of your money right away, and a monthly payment would suit you.
  • Your missed payments can be caught up at closing, so the existing loan, if there is one, is paid off or brought current.

What stays in your name, and for how long

The house becomes mine at closing. What you hold is the note: my promise to pay you, secured by the house, for as long as the note runs. If your own mortgage isn't paid off at closing, that loan stays in your name too.

The risks to you

  • You get paid over time, not all at once. If you need the money now, this isn't the right way.
  • If the buyer stops paying, getting paid or getting the house back depends on the papers you signed and your state's rules. Have a lawyer write or review the note and the mortgage or deed of trust that secures it.
  • If an existing mortgage stays in place and has a due-on-sale clause, that clause lets the lender call the whole loan due when the property is sold or transferred without its written consent.
  • If you still owe on the house and stop paying that loan, it can hurt your credit score and limit your options.

What I need to see to make an offer

  • What you owe on the house, if anything, and to whom.
  • How much you'd like at closing and how much you're comfortable receiving monthly.
  • How far behind you are, and any foreclosure notice or sale date.
  • The address, and a few photos or a walk-through.

Sources

  1. CFPB: What is a contract for deed? (consumerfinance.gov)
  2. 12 U.S.C. 1701j-3: Preemption of due-on-sale prohibitions (GovInfo) (govinfo.gov)
  3. CFPB: A person I hired to help with my mortgage advised me to stop making payments on my mortgage loan so I could qualify for a loan modification. Do I have to do this? (consumerfinance.gov)

Want me to look at your situation?

Tell me about the house and where things stand. I'll look at the ways I could buy it, and we can talk through how they compare with your other options. I never charge homeowners anything.

Ask about my house