Gary M. Singer
Sun Sentinel (MCT)
— QUESTION: I am trying to sell my home but am not getting any showings. I'm thinking about allowing a buyer to finance it through me. Is this a good idea?
ANSWER: It certainly can be, depending on your situation. If you own the property free and clear of any mortgage loans, financing the transaction for the buyer yourself has its advantages. But you'll need to take precautions to protect your interests. This sort of arrangement can help attract a deeper pool of prospective buyers who have temporary financial issues. You can finance the property for your buyer at an interest rate much higher than any bank will pay you for storing your money.
I recommend that you not finance more than 90 percent of the value of the house and that you charge an interest rate a couple of percentage points higher than what the banks will -- 6 percent to 8 percent, for example. Like any other lender, you should do your basic due diligence, such as requiring a loan application, reviewing the buyer's credit and getting a reasonable down payment. The main risk in offering seller financing is that you may have to file for foreclosure. So you should have an attorney prepare the promissory note and mortgage for you and have the closing company issue title insurance on your new loan.
Having said all that, I suggest you carefully analyze why your house is not getting any showings. It could simply be that you're asking for too much money or the listing itself is poorly worded.
Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He is the chairperson of the Real Estate Section of the Broward County Bar Association and is an adjunct professor for the Nova Southeastern University Paralegal Studies program. Send him questions online at http://sunsent.nl/mR20t7 or follow him on Twitter @GarySingerLaw. The information and materials in this column are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed. Nothing in this column is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.