 Not all buyers – especially investors looking to “turn” properties – are eager to seek bank financing. They would rather avoid loan costs and the possibility of a deal going south at the last minute. In return, they often offer the seller a slightly higher price.
Some sellers – especially older folks looking for dependable monthly income – don’t necessarily want to be cashed out of a small rental property they’ve held for years.
For example, Kenny Graham, 63, received an offer to sell his home from the son of a former college teammate. Graham, divorced with no children, planned to spend a majority of the sales proceeds on a new place in Puerto Vallarta, Mexico. “The buyer gave me my price,’’ Graham said. “But he wanted me to take his terms. Under the circumstances, it sounded like a good deal to me. He wants me to carry the paper for a few years, and I’m able to move on my schedule. Instead of buying in Mexico, I’ll just go down there and rent and wait to find something I really want to buy.’’
“Carrying back” all or a portion of the proceeds can make a lot of sense. Most of the time, seller financing works well for both sides, but both sides – especially the seller – should be prepared to handle the deal much like a small business. While the buyer can simply mail you a check every month, it’s up to you to craft the ground rules.
If you participate in any sort of seller financing, make sure to build in safety features that protect your investment and sanity. In fact, it’s not a bad idea to copy many of the loan requirements a local bank would insist upon – especially if you will be out of the country most of the year.
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