While “seller financing” may sound like a scary term to most people it is actually a very powerful tool for increasing the value of your property.  The main reason that seller financing will add value to your property is that you increase the number of people who can qualify to purchase your property because you control the qualification how does seller financing work standards.  The more people who can buy your home the more valuable it becomes (the basic law of supply and demand).

“Equity Only” financing is exactly what it says, the owner only finances the equity they have in the home.  The way this works is the buyer is required to secure their own financing equal to (or greater) than the owner’s underlying mortgage.  The loan proceeds from the buyer’s loan will pay off all indebtedness of the owner and remove the owner from future liability.  The balance of the purchase price is then financed by the owner to the buyer.

Why would this be a great deal for everyone?  The owner is able to sell a home more quickly than other comparable homes on the market and for full market value (sometime more).  The owner is also able to dictate the terms of the financing to meet their needs.  The buyer has an easier time to qualify for their conventional loan and may even qualify for better rates (depending on the LTV of the loan).  The mortgage broker gets new business and a lender gets a new loan to service.  Any real estate agents involved with generate commissions.  The wheels of the economy turn and everyone is happy.

While there is no such thing as “no risk”, the owner in this situation has very little risk.  If the buyer pays as agreed then the owner collects interest on their equity and will still preserve all of their equity too.  However, should the buyer fail to pay, the owner is in a powerful position to take the house back (through foreclosure) and then sell it again.  The foreclosure costs would be paid by the 1st mortgage and the original owner is in a strong position to simply buy back the property.  And should the home be bought by someone else at the foreclosure auction, any dollar amount over the 1st mortgage is paid to the previous owner, thereby allowing them to collect their equity at the foreclosure auction.