Seller financing

In today’s challenging housing market, it’s often tough for both sellers and buyers. A technique popular a quarter century ago has reappeared to help close deals. What is this? N.C. State University economist Mike Walden responds.

“Well, this is seller financing. In fact … I talked about this almost 30 years ago on this program, and then the motivation was not because you couldn’t buy or sell due to the depressed market; it was simply high interest rates.

“But it’s now making a comeback. And simply put, this is where instead of let’s say you own a house and you find a buyer but the buyer can’t get financing, you in a sense finance that person. Let’s say your house is worth $300,000. Instead of that buyer giving you that $300,000 because he’s gone out and got a mortgage, instead what you do is set up payments over time. So, you’re only going to get a little bit each month.

“Now you may put an end on that. You may say, well, after 10 years whatever’s left of $300,000 you have to give me. But this is becoming more popular. In fact seller financing is up over 50 percent over the last couple of years.

“Obviously you have to worry about a lot of things: You have to worry if you’re financing a seller, you have to worry about the credit worthiness of that buyer. You also have to worry about the fact that in some mortgages if the home is transferred to another occupant, the holder of that mortgage may call the mortgage.

“So, you the seller still (have) a mortgage that you’re paying on and you’re not living in the house, you need to make sure that that mortgage will not be called. So, clearly if you do seller-financing, get an expert, get a real-estate expert and an attorney to help you with specifics here. But in some situations it can be a win-win for both sides.”