Seller financing is a unique arrangement in real estate transactions where the seller assumes the role of the lender. Instead of obtaining a loan from a traditional financial institution, the buyer secures financing directly from the seller. The process involves the buyer making a down payment, after which the seller finances the remaining purchase price. The buyer and seller then formalize this arrangement by signing a promissory note that outlines the loan amount, repayment schedule, and interest details.
To secure the transaction, a mortgage or deed of trust is recorded with a local property registry to confirm the buyer’s indebtedness and the seller’s interest in the property. The buyer repays the loan over an agreed period, typically with interest, similar to a conventional mortgage. Seller financing can offer flexibility for buyers and additional selling points for sellers in competitive markets.
For those considering seller financing, it’s advisable to consult with a real estate expert to navigate the legal and financial complexities effectively.