- Money Bags
- Posts
- 💰 Screw the banks
💰 Screw the banks
Preston Victory
January 29, 2025
In partnership with
Welcome, Future Early Retirees.
In today's market, where traditional bank loans can be cumbersome or out of reach for many, seller financing emerges as a creative and often beneficial alternative. Let's dive into what seller financing is and how it can serve as a powerful tool for both buyers and sellers that is not often discussed.
In today’s newsletter:
Brought to you by 1440 Media
Receive Honest News Today
Join over 4 million Americans who start their day with 1440 – your daily digest for unbiased, fact-centric news. From politics to sports, we cover it all by analyzing over 100 sources. Our concise, 5-minute read lands in your inbox each morning at no cost. Experience news without the noise; let 1440 help you make up your own mind. Sign up now and invite your friends and family to be part of the informed.
Seller Financing
Seller financing, also known as owner financing, occurs when the seller of a property agrees to finance the purchase for the buyer instead of the buyer obtaining a mortgage from a bank. Here’s how it typically works:
Agreement: Buyer and seller negotiate terms like interest rate, repayment schedule, and down payment.
Promissory Note: The buyer signs a promissory note agreeing to pay the principal and interest over time.
Deed of Trust/Mortgage: The property title might be held by a third party until the loan is paid off, or the seller might hold the mortgage.
Benefits for Buyers
Easier Approval: If you have less than stellar credit or don't meet conventional bank criteria, seller financing could be your ticket to homeownership.
Negotiable Terms: You might negotiate a lower interest rate, longer repayment period, or a smaller down payment.
Faster Closing: Without bank bureaucracy, closing can happen much quicker, which is ideal in a hot market.
Flexibility: If your income fluctuates, you might negotiate terms that allow for variable payment schedules.
Advantages for Sellers
Higher Sales Price: You might fetch a higher price since you're offering financing, which is a valuable service.
Steady Income Stream: Instead of a one-time payment, you receive regular payments which can provide income over time.
Tax Benefits: Spreading out the income from the sale can potentially defer or reduce tax liability.
Retain Property Control: If the buyer defaults, you might regain control of the property more easily than with a bank-involved foreclosure.
How to Avoid the Bank
Direct Negotiations: Engage in direct talks with potential buyers to outline the financing terms.
Legal Documentation: Ensure all agreements are legally sound. It’s wise to involve a real estate attorney to draft or review the documents.
Due Diligence: Buyers should still do their due diligence, like property inspections, just as they would with a bank loan.
Record Keeping: Keep meticulous records of payments received and terms of the agreement.
Considerations
Default Risk: Sellers face the risk of buyer default, which could mean re-entering the market to sell the property again.
Lien Priority: Be aware of existing liens on the property that might affect the deal.
Regulatory Compliance: Both parties need to ensure they're following state laws regarding real estate transactions and lending.
Seller financing can be a win-win, providing an alternative path to homeownership for buyers while offering sellers unique financial and tax benefits. If you're considering this route, whether as a buyer or seller, thorough preparation and legal advice are key to a successful transaction.
Looking for a new credit card?
Pay No Interest Until Nearly 2027 AND Earn 5% Cash Back
Use a 0% intro APR card to pay off debt.
Transfer your balance and avoid interest charges.
This top card offers 0% APR into 2027 + 5% cash back!
Thank you for reading!
Reply to my emails anytime! I’d love to hear from you.
This email was sent with beehiiv, where you too could start your own newsletter for free!
Here’s how you make sure you get the most use out of Money Bags 💰
Be sure you are subscribe. If not, you can here
Share this with someone you know and love using your referral link
Utilize the FREE financial tools offered
Things I Found Interesting
What DeepSeek’s ultra-cheap models mean for the AI arms race
Starbucks brings back condiment bar, free refills on drinks ordered "for here"
Costco confirms switch of food court sodas from Pepsi to Coca-Cola
Perplexity AI revises Tiktok merger proposal that could give the U.S. government a 50% stake
How To Become A Digital Nomad: Living Your Best Wanderlust Work Life
Feedback
You can add more feedback after choosing an option 👇
Enjoyed this newsletter? Forward it to a friend and have them signup here.
Talk to you all next Wednesday 🙋♂️
Reply