Let’s start by recalling what a seller financing agreement is.
A seller financing agreement is a type of real estate deal where the seller acts as the mortgage provider to the buyer. In this case, the buyer makes monthly payments toward the principal of the house plus interest fees. From a seller’s perspective, it can be an effective exit strategy in a buyer’s market. By using a seller financing agreement, it opens up the pool of potential buyers since it is now usually easier for them to access home financing.
Where to obtain a seller financing agreement.
When you think about drafting a seller financing agreement it can be intimidating. After all, you don’t want to leave any loopholes that come back to bite you. But there’s no need to worry. Here are some sources you can turn to:
Real estate lawyer – You can always turn to a real estate lawyer for assistance. Although, this may be a costly option unless you plan to use the agreement template across multiple properties.
Online search – It never hurts to turn to Google to find you a seller financing template. However, you must be aware of whether or not it conforms to your local state’s regulations.
Office supply shop – Instead, you can try an office supply store or some other place that may carry a seller financing template. The benefit of this option is that it will be in alignment with local regulations.
Here’s what you need to include in the agreement.
Selling price of house: how much are you actually selling it for?
Number of payments to be made: in how many payments, will this amount be paid?
Interest rate: at what rate of interest will the loan be financed?
Total cost to buyer: what is the total cost to the buyer (i.e. principal plus interest payments)?
Due date for payment: when must the property be paid off by?
Penalties for late payments: what are the penalties for any missed or late payments?
You must also include the names and addresses of each party. Other than that, you are ready to go.
Things you should know when drafting the agreement.
There are some things that just can’t be said in the seller financing agreement. This tends to vary by state, so be sure to look into this. For example in some states, you can never require full payment at an immediate point in time. However, in some states you can also hold people accountable for the agreed upon price even in the case of default. Also in the case of default, you generally cannot break any laws in the case of eviction. However, we do have an article explaining the US eviction process that you can read
here. You also cannot force them to give up any rights that an average citizen is to abide by. Be sure to keep these in mind, so your contract is legally binding.
What happens if someone doesn’t hold up their end of the deal?
This happens if either party violates a provision, or if the contract is invalid from the start of the process. In either case, you need to know what happens. Of course, it will vary by state. In the case that the buyer defaults, the property typically goes through the foreclosure process before you can find a new buyer to do business with. Also, as we mentioned in some states, you may be able to hold the people responsible for the agreed upon amount despite them defaulting.
In the other case of an illegal contract, the buyer has some options. The first option is to opt-out and even potentially sue for damages in some cases. In others, they may choose to pursue the agreement. However the seller isn’t able to collect any late fees or other provisions until a new contract is signed.
Today's market is filled with many opportunities for the savvy investor. Our Elite Legacy Education trainers will introduce you to proven strategies that can help you launch your career as a successful real estate investor.
Don’t miss out on all of the ways Elite Legacy Education can help you reach your goals in life!
Learn more about Real Estate Investing in our upcoming free interactive Online Training! Register Here VIDEO Want the live experience? Attend an upcoming free workshop coming to your area! Register Here
Browse through our Rich Dad Education reviews by clicking above!
Founded in 1992, Elite Legacy Education is a recognized global leader in quality financial education.
Legacy Education Alliance, Inc. is a leading provider of educational training seminars, conferences and services. Rich Dad Education offers real estate & stock training based on Robert Kiyosaki's book Rich Dad Poor Dad.