Have you heard of Seller Finance? Some buyers call it Owner Finance but it’s the same banana. You may have been offered to do a Seller Finance deal for your house but don’t know what that means. Let us help you learn the advantages you will get and how you can earn interest like a bank.
💡Good to know:
Seller Finance is also referred to as Owner Finance. It is also called a purchase-money mortgage by other buyers.
As professional home buyers we always come up with creative ways to guarantee win-win solutions for homeowners like you who need to sell your house. Read on as we outline how this selling option can work for you.
#1 Earn Interest
With a Seller Finance offer you will get to earn interest like a bank. Instead of taking a conventional bank mortgage, the buyer signs a mortgage with you as the seller. Compared to a cash offer, which could be lower than the EMV (estimated market value), financing the buyer’s mortgage can make it much easier for you to sell your house. With this option you can expect to get a premium offer price that could be at EMV or higher since the interest will be baked into the offer price.
#2 Lower Capital Gains Taxes
Capital gains taxes are levied on the income you make from the sale of real estate or other assets. Another advantage you can get from this option when you sell your house is how it can affect your Capital Gains Tax. Depending on the terms of your purchase agreement you can lower or avoid a portion of this tax. Below are two scenarios you can learn from, but you must note that you have to fully understand the tax implications of the deal making it best to consult an expert before entering the agreement.
- Scenario 1: You can avoid capital gains tax on a portion of the sale. If you finance a portion of the purchase price and then agree to structure the loan as an interest-only loan, you may be able to avoid capital gains tax on that portion of the sale.
- Scenario 2: You can get an ordinary income tax rate instead of a capital gains tax rate if the deal is structured so that the buyer pays back principal and interest.
#3 Get True Monthly Mailbox Money
Unlike renting the house, Seller Finance allows you the advantage of getting true monthly mailbox money. When you have your house rented the monthly amount you receive does not go to your pockets entirely. You have to consider operating expenses such as Property Tax, Insurance, HOA Fee, and Maintenance fee. You will also have to look at factors like the Vacancy Rate, Tenant Management, and Property Management Fee if you decide to hire a service. When we say getting true mailbox money, we mean that the amount paid to you on a monthly basis will be entirely free from other expenses for the house since you will be letting it go.
#4 Premium Pricing
This is where you get the advantage of not getting low ball offers because you can ask for a better price when you sell your house through Seller Finance. Depending on your purchase agreement with the buyer, the interest can be paid through the monthly mailbox money or with the balloon payment at the end of the term.
#5 Sell Your House Fast
Lastly, as a seller who needs to sell your house fast, Seller Finance is not a hindrance to that but an advantage. Buyers are very flexible with down payments and deals can be settled within a week if not a few days. You will still end up with more cash in your pockets because the buyer can still waive any commission since it will be a direct sale and can offer to pay any closing costs.
If you are ready to move on with selling your house through Seller Finance and taking advantage of the benefits like earning interest on your property, we’d love to help you out. We’re more that happy to explain how the process works. Just call us at (520)261-6116 or send us a message now!