3. Seller Financing
Definition
When the seller of a property accepts a
note and trust deed as part of the
purchase price. The buyer owes the
seller the amount specified in the note.
5. The Deal Example
Seller has no loan on the property (free & clear title).
Buyer wants property
Buyer’s loan options are limited or undesireable
Buyer has resources to pay payments (income)
Seller prefers or will accept payments instead of the full
purchase price
Buyer makes promise to pay, seller accepts
Sale closes escrow
Buyer makes payments
6. Seller Financing Math
Example
The Variables:
$500,000 Property Value
$100,000 Buyer’s downpayment
$400,000 Seller Carries Back Financing
$40,000 Estimated Closing costs paid by seller (8%)
$60,000 Net cash to seller at closing + Buyer’s
promise to pay the balance of $400,000.
9. Benefits to Seller
Income Taxes
Return on Investment
More Buyers
Faster Transaction Closing with Less
Decision-Makers
Note and Trust deed are Marketable
Structure Customized to Their Situation
10. Seller Considerations
Include:
• Do we want to risk owning this property again?
• Do we have confidence that our loan is well-secured?
• What kind of interest rate can we get on our cash in the bank?
• Credibility of the Buyer?
• What would we do with the cash proceeds from the sale,
anyway?
• Could we use a monthly payment?
• How long are we willing to wait for the proceeds?
• What are credit, legal, and tax implications of our decision?
11. Should Some Sellers Avoid
Seller Financing? Yes
If you have no equity or are
pursuing a short sale If you need the cash immediately
from the sale
14. Benefits to Buyer?
All Terms Are Negotiable
Credit Score is Less Important
Down Payment Flexible
Can Use Other Collateral
No Cosigner Needed
Terms Can be Renegotiated
Closing Cost Savings
Property Value More Important Than Buyer’s
Qualifications
17. What documents are
required?
Note (Detailed terms of repayment)
Trustdeed (recorded in public domain at
County Clerk Recorder’s Office)
Reconveyance (when loan is paid off)
Purchase Contract & Escrow Instructions
Amortization Schedule for Payments
22. Real Estate Broker Reality
Listing broker must be director with the strategy,
and monitor information to parties.
Manage buyer expectations- if buyer’s agent
Manage seller expectations- if seller’s agent
Become educated in seller financing matters and
benefits to the parties
Expect transactions with inexperienced agents
Have professional resources to refer to, like
CPAs and attorneys, and trust deed buyers
23. Real Estate Brokers
(Insider Secret)
In my experience, over 85% of active
agents have never participated in a seller
financing transaction.
24. The Real Estate Broker
as seen by Buyer & Seller at Successful
Close of Escrow in a Seller Finance
Transaction
29. Tip #4
The Terms of the Seller Financing
Can Increase the Benefits in
Transaction to Both Parties
You can create more
opportunity and
more value in your
property by offering
seller financing.
30. Tip #5
Buy real estate.
And use what you have to get what you
want.