Selling a home with Seller Financing (Carrying the Note) can yield substantial benefits
for the Seller. Here’s how:
By offering Seller Financing, the seller may increase the pool of potential Buyers
looking at their home and not competing homes for sale.
The Seller, in some cases, can ask a higher purchase price
The Seller’s risk is mitigated by the collateral securing the Note
(most often the home for sale).
The monthly payments received, often far exceed the returns offered by
bank CD’s, Savings/Checking accounts.
Capital gain taxes (if applicable) are paid as payments are received and not
one lump sum.
In the following example, the Seller wants to sell their home and also receive a monthly payment to supplement their other income.
Bank: (Traditional or all cash transaction)
- Their monthly income stream runs out just over 12 ½ years from sale.
Note: (100% Seller financed)
- Their monthly income continues for a total of 24 years
Seller needs $750.00 / month to supplement income.
1.Bank
$100,000.00 capital gain/nest egg harvested
$ 15,000.00 lost to taxes
$ 85,000.00 put into bank @ 5% interest
$ 750.00 /
month P & I available for 154 Mos.
2.Note
$100,000.00 capital gain/nest egg harvested
$ 0.00 lost to taxes
$100,000.00 purchase money note @ 7.5% interest
$ 750.00 / month P & I available for 288 Mos.
* Monthly payments can go to Seller, Seller’s heirs, favorite charity, or any designated party.
** Each scenario did not take into consideration down payment funds or accelerated payoff terms.
