A seller-financed real estate transaction involves the property owner providing the buyer with a loan to purchase the property, eliminating the need for a traditional mortgage from a bank or other lending institution. This arrangement often involves a promissory note secured by a deed of trust or mortgage, much like a conventional loan. For instance, a homeowner might sell their property directly to a buyer, setting up payment terms, interest rates, and other loan details. This approach allows buyers to acquire property even when traditional financing is challenging.
Seller financing offers several potential advantages for both buyers and sellers. Buyers who may not qualify for conventional loans due to credit history, self-employment, or other factors gain access to homeownership. Sellers, on the other hand, may receive a higher sale price, potentially benefit from faster closings, and maintain a steady stream of income through the installment payments. Historically, this method has been particularly relevant during periods of tight lending standards, providing an alternative pathway to property ownership.
