Should I offer Seller Financing?

Seller financing, often referred to as a Vendor Take Back (VTB) or Private Mortgages, are fairly common in commercial transactions.  It can also be used in a residential sale under the right circumstances. It does have risks, but in the right situation can net a seller a faster sale and a better profit.

If the Seller has adequate equity and is able and willing to wait for some of the money from the transaction, it is a way to bring more buyers to the table.  Often, the terms may be more desirable than what a conventional funder may offer and the interest rate can be lower.  The Seller is generally willing to take a higher Loan to Value (LTV), especially important when the conventional financing market underwriting has tightened.  

More potential buyers may be able to purchase the property, using the Vendor Take Back for some or all of the financing.  Prospective buyers are able to preserve some of their cash to renovate the building or fund their business, making it a much more desirable location or business to buy.
If Seller is firm on his price, he may find Buyers that are willing to pay a little more as long as the terms are flexible.  In the event that the Buyer defaults, the Seller will incur some costs and regain ownership of the property.  It is important to get good legal representation and to understand the risks before making the commitment to hold a VTB mortgage.

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