Are you looking to sell your house using seller financing? Here’s 6 seller financing tips for selling in Toronto…
There are several ways to sell your house. You may want to list it with a realtor and see what you can get on the market. On the other hand, you could sell to a real estate investing company like us at Cash House Buyer GTA. Or you could even be the lender to the buyer and sell your house to an interested buyer while receiving payment over time.
Seller financing, which is often referred to as providing a “VTB” (Vendor Take Back Mortgage), is an under used but potentially quite beneficial strategy for selling a house. Essentially you and the buyer agree to terms in which the buyer makes regular monthly payments, like a mortgage over a set term (often 3-5 years). In this post we’ll discuss 6 seller financing tips for sellers in Toronto…
Seller Financing Tip #1: Price Is Not Everything
Price is just one aspect of the agreement you’ll work out with the buyer. Obviously you’ll need to arrive at a price that makes sense for both you and the buyer. However, keep in mind that there are other components to consider and these could be more critical to your overall benefit from the sale.
Seller Financing Tip #2: Duration
Think about the term of the “loan”. You are essentially providing the buyer with a loan to purchase your property. You will have to determine how long you would like to be receiving payments for. Often the largest consideration in determining this is taxes. You may be retiring in 4 years and would like to receive the balance of the purchase price once you retired. In this case a 5 year term could be optimal. The buyer will make monthly “mortgage” payments to you for 5 years and the remainder at the end of that term.
Seller Financing Tip #3: Terms of the Agreement
Sellers using this strategy often overlook the terms while they are focused solely on the price. The terms could include things such as how much downpayment the buyer is providing upon purchasing the property, an early repayment charge, a missed payment fee and of course the most important, what interest rate you are charging the buyer.
Seller Financing Tip #4: Mitigate Risk
Regardless of who the buyer is and how trustworthy you believe them to be, this is a long term relationship and things could go wrong. As a result be sure to protect your interests and reduce risk. You will definitely want to have adequate insurance and the same goes for the buyer. You may also consider adding a clause in which you retain ownership of the property until the house is fully paid.
Seller Financing Tip #5: Build Contingencies
What if the buyer no longer wants the house, or can longer pay, or wants to pay early, or wants to use the house in a different way than expected? Or what if your circumstances change and you no longer want to sell or you need to sell even faster? This is why a great deal of planning is required and contingencies should be in place. Of course you can’t predict the future and having an exhaustive list of what could happen is no possible. What you can do is consider the most likely challenges or circumstances that may arise and how this will be handles. You and the buyer should agree on these contingencies and ensure the proper protocol is referenced in the agreement.
Seller Financing Tip #6: Get A Lawyer
Whether you are a real estate expert or using Seller financing to sell your house for the first time, you always want to work closely with a lawyer and seek their guidance around writing up an air tight contract and ensuring everything that is required is being considered.