How to obtain the most suitable seller financing for you

I cannot buy anything unless I am able to get seller financing. What is the best way to find these sellers?

There are several ways to find sellers highly likely to hold the financing for you. Every community has a few people who specialize in buying investment properties and then selling them and holding the financing through a vehicle called a bond for title, land sale contract, contract for deed, or lease option contract. Those people are generally well known in the community because of the large volume of their real estate transactions. Ask a few real estate agents, escrow companies, or real estate lenders for some names.

Senior citizens are more likely to hold the financing than younger people. That is because a senior citizen who has held property for a long period of time probably has little or no debt on it. If the property is a home, it may have no mortgage debt, even if it was a relatively recent purchase. If the seller does not need cash from you to pay off his or her mortgage, and he or she does not need cash from you to buy another property, then the seller is a good prospect to hold the financing. Seniors are excellent prospects because they will usually owe no taxes upon the sale of their home, especially when buying homes to use as rentals. They do not need cash at closing.

Current investors selling their rental properties are good seller financing possibilities. Just because they are selling does not mean the property is a bad investment. The current owner might be trading up to something larger, consolidating into certain neighborhoods, or simply tired of dealing with tenants. The owner is, however, used to regular monthly income from his or her properties.

He or she is also aware of the continuing value of the property as collateral. Selling the property and holding a mortgage on it makes perfect sense for such people. Finally, you might want to make it a habit to ask about seller financing right at the beginning of any discussion. There is no point wasting time learning about all the features of property and viewing it if you cannot buy it. Begin each conversation with, "I limit my investments to those with seller financing because I find it is such a win-win situation for both parties. Is that available for this property?"

This is a very risky form of seller financing, so be careful. You do not receive a deed until every payment has been made in full. Some states have very poor consumer protection laws in this area. If you make payments for ten years and then miss one payment, you could lose the property and all the equity you thought you were building up. Other states treat these transactions as if they were mortgage loans, and give buyers protections regarding notice of default, opportunity to cure the default, and other such issues. Be sure to find out the laws in your state before pursuing this course.

If I, as an investor, sell property and hold the financing, what should I be aware of?

You should do most of the things a regular lender does to protect his or her interests, which include the following.

Pay for a lawyer to draft the note, mortgage, and any related documents for you.Taking forms off the Internet or from a book can be risky if you do not fully understand all the verbiage. If at all possible, ask your lawyer to use the standard Federal National Mortgage Association or Federal Home Loan Mortgage Corporation for your state. That way, if you later want to cash out and sell the note and mortgage in the nationwide marketplace called the secondary market, that will be easy to do.
Make sure everything is prepared just as if you were doing business with strangers, especially when dealing with friends and relatives. This helps you avoid misunderstandings. Plus, you never know what is going to happen with that relationship later. It might fall apart, especially if there are money problems.
Require proof of property insurance that protects your interest. Make sure you are listed as an additional insured on the policy.

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