Seller Financing - Six Safety Tips

By Steve Gillman - 2006

Why offer seller financing when you sell? You get a higher price, a good return on your money, a faster sale and you can sell a property that's otherwise difficult to sell. Some great reasons, now how do you do it safely?

1. Large down payment. The most obvious way to be safe, but not always possible.

2. Other security. If they want it with a low down payment, and you like the return you'll get, make it safe by putting an additional mortgage on other property the buyer owns, to be released when they've paid down the balance to a certain level.

3. Credit check. Have the buyer pay for and bring you a credit report. Bad credit might be okay, but the type of bad credit is important. Unpaid, disputed hospital bills are not as relevant as unpaid loans.

4. Use your instincts. If you're usually right about people, give weight to your judgment of their character. I'd trust a man who felt morally obliged to pay debts over a playboy that happens to have decent income at the moment.

5. Look at the whole picture. Suppose that a bank will loan 90%, and is okay with you taking back a $5,000 second mortgage, allowing the buyer to buy with what cash he has. If you get $6,000 more than you expected by accommodating the buyer's needs, where's the loss? You'll be okay if he never pays the $5,000, right?

6. Use a lawyer for knowledge. Perhaps in your area it takes two years to get a foreclosure on a mortgage through the courts, and only six months to foreclose on a "contract for sale." Knowing that, and other things a lawyer should know can help you sell in the safest way.

Seller financing makes it easier to sell, and to get a higher price. Just be careful about it. Get a real estate lawyer to review your paperwork, and use the tips here.

Check out my book, now free: How to Sell a House

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