Seller Financing

In depth

Seller financing is the umbrella concept covering contracts for deed, purchase money mortgages, wraparound mortgages, lease options, and AITDs. The seller becomes the de facto lender, receiving payments over time secured by the property. Misconception: seller financing is not a workaround for buyers who cannot qualify; well-structured seller financing is a sophisticated investment tool that can yield higher returns than rentals while reducing operational burden. Practically, sellers should evaluate buyer creditworthiness, comply with Dodd-Frank if the buyer is a consumer, charge at least the AFR to avoid imputed interest, and use a third-party servicer to handle payments and 1098 reporting. Buyers benefit from flexible underwriting and faster closings, but should obtain title insurance, record their interest, and consult an attorney before signing.