The Hazards of Seller Financing

Seller financing is potentially a beneficial way to sell a piece of property. However, with seller financing comes a few potential hazards that you will want to be aware of. Here are some hazards associated with seller financing.

Subordination Clause

At some point, many sellers are asked to allow their loans to be subordinated to other loans on the property. This is typically a recipe for disaster as it takes away much of your claim on the property. If a buyer wants to include a subordination clause, you should most likely avoid it at all costs.

Avoiding Payment

Another potential problem you will want to watch out for is when a buyer does not make their payments. Whenever you come to an agreement with a buyer, they are telling you that they are going to make a certain payment every month. If they decide that they do not want to make the payment, it can be difficult for you to get your money. You will have to worry about evicting them, which can be difficult. This is a big problem whenever the buyer has put down a certain amount of money on the house. They have invested some equity in the property, but they are not paying you the amount that was agreed upon in the contract.

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