| Homeowners
who are anxious to sell often consider seller financing, which may
include taking back a second note or even financing the entire purchase
if the seller owns the home free and clear.
Seller financing differs from a traditional loan because the seller
does not give the buyer cash to complete the purchase. Instead, it
involves extending a credit against the purchase price of the home while
the buyer executes a promissory note and trust deed in the seller's
favor. These special circumstances must be acceptable to the lender who
makes the first mortgage on the property.
The necessary paperwork is prepared by the title or escrow company
after the terms are worked out between the buyer and seller.
It is critical to thoroughly evaluate the creditworthiness of the
buyer first. Fear of default makes many sellers reluctant to take back a
second. But seller financing can bring a higher price plus complete the
sale sooner in some situations.
Resources:
* IRS Publication 537, "Installment Sales." Order by calling
(800) TAX-FORM.
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