Seller Financing

Seller financing is a loan provided by the seller of a property or business to the purchaser. Usually, the purchaser will make some sort of down payment to the seller, and then make installment payments (usually on a monthly basis) over a specified time, at an agreed-upon interest rate, until the loan is fully repaid. In layman's terms, this is when the seller in a transaction offers the buyer a loan rather than the buyer obtaining one from a bank. To a seller this is an investment in which the return is guaranteed only by the buyer's credit-worthiness or ability and motivation to pay the mortgage. For a buyer it is often beneficial because he/she may not be able to obtain a loan from a bank. In general the loan is secured by the property being sold. In the event that the buyer defaults, the property is repossessed or foreclosed on exactly as it would be by a bank.

There are no universal requirements mandated for seller financing. In order to protect both the buyer's and seller's interests, a legally binding purchase agreement should be drawn up with the assistance of an attorney and then signed by both parties.