subject: How To Deal With The Disadvantages Of Seller Finance [print this page] For people who like to have their own home amidst the inflationary situation, options like seller finance can be considered as a gift. This scheme doesn't require as much from the buyer as the bank does and he doesn't have to worry about bad credit ratings at all. However, while this may be the answer to cash-strapped people who want to buy homes; it has its downsides which the buyer must learn to address. As an option to renting or paying in cash, this is still a prudent one though.
The buyer must learn about the drawbacks of getting into a seller finance scheme. This is necessary before he can think of ways to prevent any instance wherein he'll be at a disadvantage. The most important thing that he should understand is that he'll not be title owner of the property unless he pays for it completely. From this fact lies another problem, which is the possibility of not being able to get the title because of problems with the seller.
You will have to contend with the possibility that the seller will not provide you with an appraisal of the home's real worth. As a consequence, you just have to trust the seller's honesty and come to terms with the price that he pegs. You can, however, avoid paying too much if you decide on hiring a professional appraiser. Since you're the one covering the cost of the appraisal, the seller may find it convenient to allow the evaluation.
In a seller finance deal, you not assured that you'll finally have the title in your control even after you've fully paid for the property you're occupying. There have been a number of cases when buyers shockingly learn later that their homes will be foreclosed soon. This can be possible if the person who sold the house to you under seller financing has unmet obligations to a senior financier. The home is still technically his so it can actually be foreclosed by the aggrieved financier.
So that you can prevent your home's foreclosure, you must ensure that the agreement reached as a result of the transaction protects you. Of course, you must be able to convince the seller about this first. Prior to entering a deal, you must take time to learn more about the seller's financial standing. Ultimately, you must see to it that there is nothing in the agreement that will put you at a great disadvantage regarding foreclosure.
The disadvantages of seller finance are not only seen in the buyer's end though. The seller also faces a certain degree of risk. Unlike banks, he doesn't require the buyer to pay him a huge down payment. The buyer is also not mandated to present a credit score or a proof of income. Because of this, he doesn't have the assurance that he'll be paid according to schedule. It's clear that while seller financing may be a good option, it'll demand trustworthiness from both buyer and seller.
by: Kerrie Kelso.
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