The vast majority of home sales involve bank financing — but that’s not how everyone does things. Sometimes homeowners decide to offer “owner financing” for their buyers. There are several reasons why a borrower may opt for seller-financing instead of involving a bank.
As the homeowner, however, you will need to include specific details in your seller financing agreement to protect your interests.
Situations in which you may offer seller financing
It’s not uncommon for Florida homeowners to rent their house out for a while only to grow tired of being a landlord. You might have a tenant that’s interested in purchasing your home, yet they might not have good enough credit to qualify for a conventional home loan. If your tenant has enough to make a down payment, then you may decide that holding on to the note and collecting interest as part of a seller financing agreement is an ideal option for both you and your tenant.
What your seller financing agreement should include
You should have a written contract between you and your buyer, no matter how trustworthy they seem. Having an airtight agreement in place will protect you from your buyer initiating an adverse possession claim.
A written seller financing agreement should contain specific details, including the loan amount and insurance, taxes and interest rates. There should also be a disclosure of any additional fees that your buyer is responsible for paying, as well.
You should also include details about whether you or your buyer will be responsible for making repairs or maintenance when drafting the seller financing agreement. This contract should also detail what will transpire if your buyer defaults on their loan from you.
What you need to know about contracts
There’s no one-size-fits-all approach when it comes to Florida sales, purchase or financing agreements. The terms for each contract are negotiable. You should document anything that the two of you agree to so that your contract is enforceable in the future. An attorney can help you draft an agreement that will stand up in a Brandon court of law, if ever necessary.