Reasons Would You Consider Seller financing (owner carry)
Pros for Sellers
- Can sell “as is” – potential to sell without making costly repairs that traditional lenders might require.
- A good investment – potential to earn better rates on the money you raised from selling your home than you would from investing that sum other ways.
- Lump-sum option – the promissory note can be sold to an investor, providing you with a lump-sum payment right away.
- Retain title – if the buyer defaults, you keep the down payment, any money that was paid, plus the house.
- Sell faster – potential to sell and close faster since buyers avoid the mortgage process.
- Get a higher price
- TAX BENEFITS. Many home sellers don’t worry about capital gains tax when they sell a primary residence, because they can usually exclude the proceeds from taxation. For those who can’t, an installment sale allows them to be taxed over a longer period. This is especially useful if the gain on a home sale would send you into a higher tax bracket. For example, if you sell a home for $200,000 with a $150,000 profit, the $150,000 could move you into a higher bracket. By selling it over 10 years ($20,000 a year, plus interest), your taxable gain ($15,000) might be more manageable. We recommend consulting with a qualified tax specialist to assess your personal situation. Seek CPA/Professional advice
Cons for Sellers
- Default – the buyer could stop making payments at any time. If this happens and he doesn’t just walk away, you could end up going through the foreclosure process.
- Repair cost – if you do take back the property for whatever reason, you might end up having to pay for repairs and maintenance, depending on how well the buyer took care of the property.