Last Updated: July 19, 2021

Will Seller Financing Return To Residential Real Estate?

Written By: Barbara L. Pearce
Calculator and pen laying on top of a balance sheet

During prior periods where it was difficult to sell property, many owners agreed to take back mortgages, so that buyers could afford to purchase. We are almost in a reverse of that situation now, because there are lots of buyers and not enough sellers. However, there is one similarity, which is that some people who want to buy cannot get financing through traditional sources, although they may be good credit risks for other purposes.

In addition, there are sellers out there who are not selling due to the need to move, but who may be downsizing now, given the sellers' market we are now experiencing. If they do not wish to invest the proceeds in the stock market, and they are not buying another house right away, or for the same amount of money, lending to the buyers could make sense.

Interest Rates

Interest rates are incredibly low right now, and people putting their funds into cash accounts are getting almost no return on that investment. If, instead, they lent some of the money for the sale as a second mortgage to the buyers, they could potentially end up with far higher returns. Buyers might be willing to bid a little more, if the sellers were taking back paper for the additional amount.

Not much has been written about this avenue in this most recent market upturn. However, it's an option for both parties, and might be considered as an alternative for willing buyers and sellers out there in the current interest rate climate.

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