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How Does Seller Financing Work?

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Tampa Probate Lawyer / Blog / Real Estate / How Does Seller Financing Work?

How Does Seller Financing Work?


Seller financing is a flexible alternative to conventional mortgage lending in Florida. Many people are unsure of what seller financing is, the advantages and drawbacks of this alternative, and how it works. While seller financing is a good option for many people, it is important to fully understand it before entering into an agreement. Below, our New Port Richey real estate lawyer explains more.

What is Seller Financing? 

In most situations, when a person wants to buy a home, they apply for a mortgage at a bank or other financial institution. If they are granted a mortgage, they purchase the home from the buyer and make monthly mortgage payments to the bank. When a person opts for seller financing, though, there is no traditional bank or institution involved. Instead, the seller of the property offers a loan directly to the buyer. In these instances, sellers essentially act as the lender.

After the terms of the loan are negotiated, a promissory note and mortgage are drafted and signed by both parties. These documents do not only outline the terms of the loan, but they also provide the seller with a lien on the property until the loan is fully paid.

The Benefits of Seller Financing 

Seller financing has benefits for both the purchaser and the seller. This arrangement provides more flexibility for buyers who may not qualify for a traditional mortgage. Additionally, the closing costs may be lower for purchasers. For sellers, the benefits of a quick sale and the possibility of earning interest on the loan are also big benefits.

Legal Considerations 

As with any real estate transaction, there are many legal considerations associated with seller financing in Florida. For example, the mortgage must include a legal description of the property. The loan documents must also include the amount owed to the seller by the purchaser. Additionally, due to the fact that many loans financed by sellers involve a balloon payment. As such, these loans must comply with the Dodd-Frank Act.

Terms of a Seller-Financed Loan 

Negotiations are much more common in seller financing than in traditional mortgage loans. For example, when obtaining a loan from a bank, they often dictate the terms such as the interest rate, down payment required, and more. With seller financing, these terms, including the repayment schedule, can be negotiated between the seller and the purchaser, which is another big benefit of these arrangements.

Risks Associated with Seller Financing 

While seller financing holds benefits for both parties, there are some risks involved, as well. For sellers, the risk is always that the buyer will default on the loan requiring the seller/lender to commence a foreclosure to recover the property. For purchasers, they may receive less favorable terms because these loans are not regulated in the same way traditional mortgages are. It is critical that both parties conduct their due diligence to ensure these risks are avoided.

Our Real Estate Lawyer Can Help with the Process 

At Messina Law Group, P.A., our experienced  real estate lawyer can negotiate your loan whether you are a purchaser or a seller to ensure you receive the best terms possible. We can also draft the documents you need to make sure you are protected in the future. We also have offices in New Port Richey OR Tampa, Wesley Chapel, and Dunedin.  Call us now at (813) 492-7798 or contact us online to request a consultation and to learn more.

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