Seller financing is not as scary as you think. Yes, you need not have to worry, but what is seller finance. In fear of getting trapped into something terrible, in most of the cases, we don’t even gift ourselves with the knowledge of knowing the different sources out of which we can probably make money. Seller financing is one such option of making money. So today we will discuss about what seller financing is and why it is not as scary as you think.
What is seller financing?
Seller financing is where the seller of the property or a business or a real estate takes the roles of a money lender or banker. Instead of approaching a financial institution or taking a factor as a middleman to finance the needs of the buyer, the seller himself finances the buyer. This is the reason as to why this is called seller financing. Ok so now you what seller financing is, but there are still threats as to how this is will work for both the parties and what will happen if the seller doesn’t repay his debts. We will sort that out here.
Why is seller financing not risky?
If you look at the concept of seller financing, superficially there are chances that you might misunderstand the concept and feel that the seller is taking a huge risk. But digging the concept a little deeper, seller financing is actually beneficial, and yes it is for the seller as well. In fact, the seller is the person who takes the majority of the advantage by financing his buyer. If you take a little time and understand what the buyer would possibly be doing if he had to go for other financing options to potentially be your client, then you might understand seller financing is less risky than most other options.
When the seller is going for a loan outside your purview, could be a bank or a money lender, you do not have control over the person’s financing plans. It is between the buyer and his financier. All you can do is to keep bothering him in case if he fails to make his payment. Now, what if I say that there is one way where you can control the financing plans of the buyer, influence his decisions and make it a win-win situation? That is what seller financing does. It will probably look like you are taking additional responsibility, but you will be earning more than what you are possibly spending.
Advantages of seller financing:
So here are some of the quick advantages of seller financing:
- The seller has better control over the financial decisions of the buyer. He can influence the client and help him take a decision that is better advantageous. Thereby you need not have to worry about the repayment as well.
- Seller financing will help the seller to get better and potential clients which otherwise he might not find. In most cases, it is money that prevents buyers from venturing into investment options. Since it is from a trusted source, it will encourage buyers to get into investments.
- In seller financing, the loan term is usually over a period of 4 to 7 years. Now that you have a buyer, you will also gain the interest out of the money that you have lent. The interest rate will probably range from 6% to 10%