Buyers Are Turning to Seller Financing to Close Deals

Since the onset of the pandemic, the capital markets have slowed. For the borrowers that have been able to secure financing, the market uncertainty has changed the length of escrow and the types of properties lenders will finance. As a result, fewer deals have closed, even for investors willing to buy in this market—but there is new financing alternative that has some buyers excited: seller financing. In a seller financing deal, the transaction closes immediately and the buyer makes principal and interest payments to the seller.

With seller financing, the bank option is taken away, and there is no bank requirements, no loan contingency, no appraisal,” John Katnik of James Capital Advisors tells GlobeSt.com. “It is a much easier way to do a transaction right now. And, for the seller, if you are willing to stay in the deal for a few more years, there are a lot of benefits. You collect interest payments on the loan, and the collateral is the property, so if the buyer doesn’t perform, you can take the property back. Seller financing also opens up the buyer pool.”