In today’s buyer’s market, seller financed real estate has become more commonplace. When the guidelines for the traditional home loans are made stringent, the seller financed real estate is in demand.  The seller financing is an effective option for the seller and the buyer.  It is also a viable solution when the property is not selling and the owner finances the purchase of the property.  The method of the seller providing the finance to the buyer for acquiring the property is known as seller finance or vendor finance.  

The present real estate market in Australia has a steady flow of foreclosures and seller financed real estate assumes prominence. In a private mortgage insurance coverage is dropped only with properties that have a minimum of 20% equity in it. Even a down payment of 5% is acceptable depending upon the credit status of the buyer and seller finance can be structured with suitable terms. The other advantage with seller financed real estate is there is no prepayment penalty in the seller finance contracts.  The buyer can pay off the real estate whenever it is convenient.  The seller takes interest in the buyer’s repayment process and even encourages him to succeed.   

Benefits of seller financed real estate:

• The qualifying criteria for seller financing is less stringent than those imposed by the traditional lenders.
• The agreement terms are more flexible
• Down payment is also flexible and agreed upon by both parties to facilitate the buyer to make lump sum payments towards down payment periodically
• The seller financing terms are tailor made to suit the needs of the buyer offering payment options such as interest only or balloon payment or more.
• The property sells fast due to seller financing which otherwise might not be sold with conventional method
• The seller can demand a higher price for the seller financed home as he is providing the finance to the buyer
• The buyer moves in immediately after the contract is signed and is faster than the time taken for conventional possession
• The seller also can claim tax breaks using the instalment scheme to show less income during the calendar year
• The seller gets a continuous cash flow from the payments from the buyer and also earns a higher interest rate than that he pays for the mortgage of the property

The downside to seller financing system is the seller gets to recover the money by allowing the buyer to pay of the property over a long time.  The seller also continues to pay the taxes and other rates on the property. If the buyer defaults the seller has to foreclose the mortgage and start the process all over again. If you are considering the idea of buying a seller financed real estate, consult a real estate expert or a lawyer for legal advice as this process involves a different set of terms and conditions. The buyer should check if the seller is a member of the vendor finance association to safeguard his interests.  The seller also is advised to take the advice of an attorney to prepare the paperwork and ensure that both the buyer and seller of the seller financed real estate understand the terms clearly.