| With stricter banking regulations because of fluctuating | | | | Any experienced private lender recognizes this as an |
| economic conditions and an unsteady real estate | | | | opportunity to salvage an unfavorable situation and |
| marketplace, real estate sellers today are carrying | | | | turn it into a positive one. By utilizing seller financing, |
| back private funding to make their property more | | | | sellers can sometimes end up getting more money for |
| salable. When an individual seller or broker finances a | | | | their property and collecting interest on top of that. |
| transaction out of pocket they are acting as the lender. | | | | Seller financing can enable homeowners to receive the |
| This is beneficial to the process because the buyer | | | | best selling price despite bad lending conditions. In |
| doesn't have to go through a rigorous approval | | | | addition, a home buyer with poor credit is able to |
| process, which can prove to be very tedious because | | | | become a home owner. It's one of those rare |
| of the heightened banking standards today. | | | | situations where everyone at the negotiating table gets |
| Over the past two years, the central bank has | | | | what they want! |
| conducted several in-depth surveys of U.S. banks. The | | | | Many real estate sellers never consider seller financing |
| most recent survey of 55 U.S. banks' current lending | | | | because they don't understand the advantages or the |
| practices and standards revealed that the percentage | | | | process. There are also common misconceptions that |
| of banks reporting tighter standards is near historic | | | | it's much too complicated to attempt to put together a |
| highs. One of these, found that about 75% of the | | | | seller financed deal, or that there are no buyers willing |
| banks surveyed indicated they had tightened their | | | | to sign a private loan. Not true! Once a seller takes the |
| lending standards for prime, subprime and commercial | | | | time to learn about the basic process and the |
| mortgages. That was up from about 60% in the | | | | advantages of offering private to sell their property, |
| previous survey. | | | | the benefits become very clear: bigger buyer pool, |
| The Fed's July survey covered 52 U.S. banks which | | | | easy loan approval process, and a much quicker |
| hold about 80% of the residential mortgages on the | | | | closing. Plus, a little education about seller financed |
| books of all commercial banks. The Fed survey found | | | | loans will make it apparent that drafting a secured |
| that only seven of the banks said they were still | | | | private loan is actually a very straightforward process. |
| participating in subprime mortgages, loans made to | | | | The bottom line is seller financing can enable a real |
| borrowers with weak credit histories. Of those seven, | | | | estate seller to get the best of both worlds: selling at |
| six said they had tightened lending standards on | | | | the desired price, closing the deal quickly, and even |
| subprime loans with only one saying it had left | | | | receiving additional income from interest payments that |
| standards basically unchanged. | | | | the buyer makes. |