13. Seller Financing

In a lease/option, the buyer leases the property for a period of time and may choose to buy it at a specified price during the lease term.

A purchase money loan is when the buyer gives a noncash asset to the seller in exchange for a reduced sales price.

Seller financing isn't an option for a seller who needs to be cashed out immediately.

If a seller offers financing with an interest rate far below market rates, the IRS will treat a portion of the principal received each year as interest.

A seller second may be used to supplement either a new loan from an institutional lender or an assumption of an existing loan.

A seller who needs some cash at closing may offer primary financing in conjunction with a supplemental institutional loan.

A purchase money loan involves the seller paying discount points to the lender on behalf of the buyer.

If the buyer pays the seller in installments over several years, part of the taxes can be deferred by the seller.

Seller financing can be used by a seller who needs all of their net equity immediately to buy another house.

A seller who needs some cash for a small downpayment on another property may choose primary financing along with supplemental institutional loan.