|Homeowners who are anxious
to sell often consider seller financing, which may include taking back a
second note or even financing the entire purchase if the seller owns the
home free and clear.
Seller financing differs from a traditional loan
because the seller does not give the buyer cash to complete the
purchase. Instead, it involves extending a credit against the purchase
price of the home while the buyer executes a promissory note and trust
deed in the seller's favor. These special circumstances must be
acceptable to the lender who makes the first mortgage on the property.
The necessary paperwork is prepared by the title or
escrow company after the terms are worked out between the buyer and
It is critical to thoroughly evaluate the
creditworthiness of the buyer first. Fear of default makes many sellers
reluctant to take back a second. But seller financing can bring a higher
price plus complete the sale sooner in some situations.
* IRS Publication 537, "Installment Sales." Order by calling