With the help of a real estate attorney or tax professional, you might discover some hidden financial advantages to seller financing – for yourself. Consider asking these questions of your financial advisor to explore how you can get as much out of seller financing as your buyer.
Monthly Income. How would your financial situation be affected if your house yielded monthly income to you instead of a lump sum, as in a traditional sale?
Higher sale price at a later date. Buyers interested in lease-to-sell arrangements often agree in advance on the sale price. Setting the contract price now insulates you from erosion in the market value of the house…if an appraiser will support that higher price when the time comes to complete the sale. Work with your financial advisor to sort out the what-if scenarios and related tax implications.
Rebalance monthly carrying costs. Some owner financing arrangements can help you offset the set costs – such as property insurance – by having the buyers take responsibility for routine maintenance, snow removal and other chores. Ask your financial advisor to help you analyze the cost vs. benefit of shifting some of those expenses to the buyer.
Different mix of fees. If you decide to completely finance the purchase, you will incur attorney and financial advisor fees that you would not have in a traditional sale. However, your buyer will avoid many of the traditional bank closing fees, and thus might be able to pay a higher sale price. Work with your advisor to see if this different mix of expenses adds up to your advantage.
Know what costs can’t be avoided. Depending on state law and your financial situation, you and your buyer will still have many of the usual transaction expenses, such as title insurance and inspection fees. Review the buyer’s offer carefully with your advisors to be sure that all the costs are accounted for and that there are no surprises for you or your buyer.
To learn more about the dynamics of pricing your home, please visit our comprehensive Pricing Guide.
