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Reasons to Use Seller Financing for Real Estate Contracts

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There are many reasons why seller financing can be beneficial to both the buyer and to the seller:

These are the more common advantages to offering seller financing.

Are there disadvantages? Absolutely.

The most common concern is performance: Will the buyer make the payments? Getting the title back if the buyer defaults can present problems. If the buyer won't leave the property then regaining possession becomes difficult. Another problem arises if the buyer vacates the property but leaves behind personal property.

Other issues pertain to the condition of the property. Will the occupant maintain it? If they abandon the property, will they "strip it" as they leave? Will they maintain hazard insurance coverage? If they vacate, how can the seller get coverage on a vacant property?

And, of course, there's the possibility of bankruptcy. If a "Notice of Bankruptcy" arrives in the mail, the seller who wishes to regain the property is legally prohibited from taking certain actions.

Seller financing means taking on certain responsibilities and risks which otherwise would be managed by a lending institution. Even though the benefits of seller financing are valuable, the risks must be considered.

Before you make a final decision, however, you may wish to consult with your Realtor, certified public accountant, or attorney. Your circumstances will determine what is appropriate for you, and they often can help you make an informed decision.

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