2 Pitfalls of Seller Financing

Seller financing is not always the best option when buying real estate. There are several pitfalls for buyers and sellers to consider. Here are just 2:

Over Priced Real Estate

Relying on seller financing means that you won't have much wiggle room to cut deals on the purchase price. You may have to pay full price, or just below the asking price in order to get the seller to agree to provide you with financing. On the other hand, if you bought the property with cash, you could ask for a significantly lower price. Cash can have a huge impact on the final purchase price, and if you've got it, you can strike unthinkable deals.

Risk of Default

A seller also faces the risk of the buyer defaulting on payments, which could be a setback for a seller. For example, if the buyer defaults during a down turn in the economy, then it will take longer for the seller to try to sell the property again. Perhaps the seller had opportunities to sell earlier in a better market, but was willing to provide financing instead. If too much time elapses, the seller may get stuck selling the real estate for much cheaper than expected in the long run.

blog comments powered by Disqus