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Seller financing is a lesser-known but viable funding option

Some Miami companies looking to purchase property may not have much luck with traditional mortgage lenders such as banks. Therefore, an alternative lending source may be attractive. If they can find a seller who is amenable, they may want to consider a deal where the current owner of the property provides the financing for the purchase.

With a traditional mortgage, the purchaser is usually approved to borrow a certain amount. The bank pays the seller the agreed upon purchase price, and the buyer pays the bank back in monthly installments. However, with seller financing, the buyer pays the seller directly every month, explains Forbes. This is advantageous for buyers because the seller may not require terms that are as stringent as most banks require. Many sellers may, however, still require a buyer to make an initial down payment.

This type of financing can be beneficial to sellers, as well. If they are having a hard time finding a buyer for their property, providing financing may help expand the pool of potential purchasers. In addition, sellers may enjoy tax benefits by collecting installments rather than taking a lump sum, according to The Balance. Plus, if the buyer defaults on the loan, the seller gets to retain the property.

Nonetheless, seller financing is not without its risks and may not suit every situation. Buyers may face higher interest rates from a seller versus a bank. In addition, this situation would only work best for sellers who own the property outright and do have a current mortgage that they need to worry about paying off.

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