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PRIVATE MORTGAGES: These are debt instruments that are created when a seller sells a real estate property to a buyer and finances the property for the buyer. Example: Mr. Jones sells a house to Mr. & Mrs. Smith for $100,000. Mr. Jones agrees to accept $10,000 cash as a down payment and to carry back a note or mortgage for $90,000 payable at $789.81 per month for thirty years.The debt instruments may be in many different forms and have different names depending primarily in what part of the country the transaction takes place. Some of the various names include: Mortgage, Note & Deed of Trust, Land Contract, Agreement of Sale, Contract for Deed, etc. They all have one thing in common. That is, they are created when a seller sells a real estate property and finances it for the buyer. This is commonly called Seller Financing.

Now I know that this very basic information for many of you reading this; however, for others it is not. We are going to discuss here and in the future, advantages to both seller and buyer in the use of Seller Financing.First off, there are numerous reasons why sellers would be willing to sell their property using Seller Financing, such as:

  • Property has been on the market a long time with no buyers.
  • Property may be un-financible by a lending institution such as a bank. Why? – It could be:
  • Land – hard to get banks to loan on land
  • Mobile Homes on land
  • Property in improper zoning area.
  • Poor condition of property etc., etc.
  • The seller may not want to receive all cash for tax reasons etc. etc.

Secondly, the buyers may have any number of reasons why they would prefer Seller Financing, such as:

  • Buyers may have some glitches on their credit and can’t get bank financing.
  • Buyers may be self-employed and have trouble getting financing.
  • Buyers may desire for many other reasons not to use bank financing.

I would say, all in all, the advantages here may appear to be in favor of the buyer; however, as we progress in our discussion, I think you will see many advantages and benefits for the seller as well.

These posts are the opinion of the author who is not engaged in rendering legal, accounting, or investment advice. If such advice is required or desired, the services of competent professional persons should be sought.

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