What does Seller Financing mean to a Buyer

Seller financing is something we are seeing more and more in today's market as the buying demand has dropped substantially in the Phoenix real estate market.  One of the reasons being that there is 25% of the buying population that is unable to purchase a home due to credit issues resulting from past short sales, foreclosures or bankruptcy.  Their inability to purchase is time sensitive as well. There are aging periods associated with all 3 of these situations and the time frames are coming close to aging enough to be able to enter the marketplace again within the next 1-2 years.

What Seller financing means to these buyers is that they are now able to purchase a home in today's market at today's price and qualify for the end all loan in a year or two when their credit scores have returned to a healthy status.  The specifics of Seller Financing or Contract for Deed is negotiable and different for each specific seller and buyer.  Generally they begin with a larger down payment, somewhere around 10% with a slightly higher interest rate than the market. So with today's interest rates in the mid 4%'s a seller financed rate would be between 6 and 8%.  At the end of the 1-5 year term, the contract usually states that a balloon payment will be due at which time the Buyer will need to obtain different financing to pay off the remainder of the mortgage or pay the full amount in cash to be free of the contract for deed and the property's marketable title will transfer to the new owner.

If for any reason you miss a payment in a situation like this, the foreclosure process can be much faster than a traditional big bank.  The buyer would lose their initial down payment as well as all payments made thus far and the property would completely revert back to the Seller. There is quite a bit of risk involved for the buyer to take on a contract for deed however, this may be a great deal because this is a buyers market today.  Make sure to review the details of your Seller Financing contract with your Attorney as well as your Real Estate Agent to make sure that this is something you want to tackle.

For more information on Seller Financing or Contract for Deed in Arizona, call Chelsea Elwood, Realtor with Keller Williams Realty East Valley at (602) 748-6136.

Here is a home for sale in Ahwatukee with a Seller Financing Opportunity.

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