Seller Financing Servicing

What is Seller Financing?

Typically, real property is purchased with funds raised through financing.  Financing is often provided by a bank or third party that takes back a mortgage on the property as security for the loaned funds.  Where the seller provides the financing, instead of a bank or other third party, the loan is called "Seller Financing".

 With Seller Financing, the seller will loan all or part of the sales price and take back a mortgage on the property as security.  This means that the buyer can come to closing with less cash, and promise to pay a certain amount to the seller over time, with interest.  This promise to pay is evidenced by a Promissory Note and secured by a mortgage on the property.  If the buyer defaults on that note, the seller can foreclose on the Mortgage and take back the property.

There are no lender fees, loan fees or points charged for Seller Financing, so the buyer pays less in transaction costs. With no underwriting or appraisals, the seller can attract buyers that would otherwise not necessarily qualify to purchase the property.  If the seller has made money on the property, Seller Financing may defer the capital gains tax payable as the principal under the seller financed loans.