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1. The seller can
act as a bank and instead of receiving all or a portion of their equity at
the time of closing of the deal, they may 'lend' it to the buyer and
receive a regular payment as usual, or else as agreed upon earlier. What
they may receive is a variety including no payments, principal only
payments, interest only payments, or else a combination. Otherwise it
could be an interest only loan, or an amortized loan. Additionally it
could carry either an interest payable at a fixed rate or a variable rate.
These will vary depending on the terms of the contract agreed upon between
the buyer and the seller.
2. The seller can allow the buyer to
take over the loan that he or she has availed of. This can be done in two
ways; the first is called an 'assumption', as per which the lender
formally allows the buyer to assume the loan which entails the approval of
the buyer's credit, and normally also a modification of existing loan
terms. The other method is called a 'subject to' as per which the lender
is not contacted, and the buyer buys the property 'subject to' the
existing financing. This can be financially risky in several ways, since
many loans have acceleration clauses which permit the lender to call the
loan due if the property is transferred
What is a Seller Finance or
'Subject to'?
Seller
financing normally refers to one of two things:
Real Estate Investing
How to get started
Common mistakes
Tips
to finding a good deal
Property Investments
Real Estate Option
Tax Liens
Wholesaling
Seller Finance or 'Subject
to'
Short Sale or
Pre-foreclosure
Rehabbing
Raw Land
Mortgage Investing
Birddogging
Condo Hotel
Hard Money Lenders
Lease Option
Appraisal
MARKET VALUE
explained