21st Century Seller Financing, No Banks Needed When You Sell Or Buy!!

By: Keith S. Donald

This article features 21st century seller financing cash creation strategies. With these strategies No Banks Are Needed When You Sell Or Buy your property!!

Each time I read the classifieds I notice more ads featuring "seller financing" and "owner financing". The offers being made include headlines of "Nothing Down", "No Credit Check", "No Banks Needed", and my favorite, "100% Financing with $0 Down!" I can only wonder, "What are you thinking?" These are very risky invitations. In most cases they are invitations to disaster. Invitations like that do not represent 21st century seller financing.

Think about what these property sellers are willing to consider. A home is universally regarded as one of the biggest investments a person or family is likely to make in their lifetime. What circumstances would make them even consider offering their relatively expensive property to someone they don't know without a credit check or a substantial down payment?

In turn you would create an installment loan for the buyer and hope you receive the scheduled payments, over 10 or 20 or 30 years.

One answer is self-evident. The banks or mortgage lenders are not providing the response or cooperation these home sellers need. Some of the questions that come up are, "Is this a reflection of my potential buyer or my collateral, which is my property?" Another common development is the difference between the appraised value of your property and the amount the lender is willing to loan.

While I am a very strong supporter of the value and creativity of seller financing, there is a right way and a wrong way for it to be done. I'm happy to report there are safer, simpler, and much more profitable ways to arrange seller financing than what is described above. You can find what you seek with 21st century seller financing.

Whenever a you decide to provide the financing for your property, several things must be done to minimize the chances of a loan default and maximize the probability of a completed contract. If you are going to finance your deal like a bank or mortgage lender, then you must think like the lender does. Do your due diligence and investigate the borrower and the property. Protect your investment.

The Down Payment
The first consideration of 21st century seller financing is the amount of the down payment. A lender wants to create the lowest possible Loan To Value (LTV) ratio for his/her funds. The amount of the down payment represents the degree of commitment your buyer has towards purchasing your house. For example a good down payment will be 20% of the purchase price.

A down payment of this size eliminates the need for the private mortgage insurance your borrower would typically have to pay for a loan with a higher LTV. Your borrower saves money and you get a much safer commitment to the purchase of your property. Lower down payments are commonly accepted. The terms and conditions of the mortgage and the note reflect the "unique circumstances" of the borrower and the property.

The Credit Report
How important is it to check your prospective buyer's credit-report to 21st century seller financing? According to the New York Times, "The credit score has become the single most important indicator used by lender's to predict whether a borrower will repay their loan."

When providing seller financing, if you don't review the credit-report of your prospective buyer, you are simply "rolling the dice", by taking totally unnecessary chances. The credit score is important for determining the loan terms and structure. It's best to always get a credit report on your buyer.

Ability To Pay
The credit report should provide details on your buyer's income, expenses, and assets. It is your buyer's cash flow, or ability to pay his or her bills that determines whether they can afford your property, and whether you should seller finance the deal.

To justify 21st century seller financing an accurately completed credit-report should provide the information needed to quickly determine if your prospective buyer could afford to buy your house.

Job Stability
The buyer’s jobs and career choices are more challenging today than ever before. One of the current measures for “job stability” is time on the job. In most cases, lenders like to see buyers in the current position for at least two years.

As much as possible, they would also like to get the impression from your buyer’s employer that the prospects for continued employment are good. Be sure to check with the employer to confirm the probability of continued employment just like other lenders do. 21st century seller financing is a perfect fit for evaluating new age life styles.

Fortunately buyers that are self-employed, on new jobs, new to the area, etc. can be easily considered for seller financing if they meet the buyer selection criteria.

The Buyer's Character
Your buyer's character is a "wild card" criteria in their evaluation because it is so subjective. How effective your evaluation is depends as much on your own perspective and experiences as those revealed to you by your potential buyer.

To make 21st century seller financing work what you really want to know is, what will this buyer do when faced with adversity? Do they have what it takes to face the unknown but eventual challenges of life with courage, commitment, passion and resolve? Or, will they "cut and run" at the first sign of trouble?

Once this information is collected and evaluated you have some choices. How much money do you need? How much do you want right now? The answers to those questions are extremely important. They will determine the best way to structure the deal so you can get the money you want or need as fast as possible.

After the amount of money you need is determined, the transaction is structured specifically to get you what you are looking for. Even though the deal may be structured with a thirty year amortization, you can get your money at the real estate closing! For you there is no waiting for months or years on the installment plan like so many others do.

How do you like that? Seller financing, where you do fund the buyer, but instead of waiting 10 to 30 years, you get all of your cash at closing. That's the way things are done with 21st century seller financing. Oh, yeah. There are No Banks Needed When You Sell Or Buy your property!!