Seller Financing When Selling or Buying Your Crested Butte Home
Seller Financing is almost exactly what it sounds like. The seller, instead of a bank, helps the buyer finance the home they want to buy. The seller provides the buyer with a loan and contracts are signed with details about the interest rate, payment schedule and the consequences of default. This method isn’t very common but you might come across Seller Financing when Selling or Buying your Crested Butte home. If that happens, here is everything you need to know from a Seller’s perspective and from a Buyer’s perspective.
Seller Financing From a Seller’s Perspective
Seller Financing may be an option if the buyer cannot get traditional financing or wants the seller to carry a note for a short period of time. The seller will ask the buyer to provide financial documentation to show credit worthiness. The seller is not a bank, there can be a certain amount of risk involved with Seller Financing.
Here is the worst case scenario for a seller: you have to chase the buyer every month, the buyer defaults, and you end up having to take the home back in a year. Additionally, you get tied up in a legal mess and never ending attorney’s fees. Then you have to go through the process of selling your home all over again.
Normally, the seller will provide a term sheet to the buyer outlining the specifics of the loan. This details the amount down, the interest rate, the term, etc. It is customary that the seller’s attorney prepares the seller’s financing documents and that the buyer will pay for this expense.
Seller Financing from the Buyer’s Perspective
As a buyer this may be a great option if the Seller is very eager to sell their home. The buyer will provide financial documentation to show credit worthiness to the seller. Usually sellers do not want to provide financing; they just want to sell their home. They don’t want to have the buyer default and have to take the home back in a year, and more importantly, they don’t want to get tied up in a legal mess.
The seller provides a term sheet to the buyer with the specifics of the loan and the buyer pays for the expense of having the financing documents prepared by the seller’s attorney. In this case, it may be good to state in the contract that the buyer will pay only up to $X for these documents to be prepared, as otherwise attorney fees may skyrocket. Generally it is recommended that the buyer hire an attorney as well to review these documents and provide advice.
Seller Financing When Selling or Buying Your Crested Butte Home Final Thoughts
If you would like to have more information about Seller Financing and what that means for you, contact me.
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