Friday, November 22, 2013 / by Fra Jamir
November’s Mortgage Credit Availability Index shows a slight relaxation in lending standards — but as most Charleston home buyers and sellers will agree, getting a mortgage is still difficult. With mortgage availability benchmarked at 100, although it’s currently at 111 ½, compared with the 800 it stood at in 2007, today’s is still a tough environment.
That’s why Charleston seller financing is being considered by more homeowners. When a home is owned outright, seller financing can draw a higher selling price (with future interest payments as a bonus). But before making such an offer, Charleston area homeowners need to consider all of the ramifications: there is more involved than just the assumption of added risk.
Of course, ordering and examining a buyer’s credit report is the starting point. If the story it tells needs too many explanations, it’s time to walk away. Foreclosing on a seller-financed home can be more difficult than through a traditional foreclosure —particularly if the financing documents are substandard.
At first blush, seller financing might seem to simplify the whole transaction, but in fact some details usually handled by a bank must be hammered out:
- Who will pay for the appraisal; who for the inspection?
- Who is going to be responsible for property taxes and upkeep?
- Will the deed be transferred to the buyer right away, or only after the home is paid off?
Those issues point out why a “handshake deal” can’t be recommended for a Charleston seller financing arrangement. Just consider the last two points: if the deed hasn’t been transferred and taxes are in arrears, whose credit is harmed?
A good attorney will draft an agreement that nails down responsibilities and penalties for a buyer default as well as a detailed payment structure. A well-drafted seller financing agreement protects both parties by preventing misunderstandings and providing an unambiguous inducement for good behavior.
Given the right buyer, clear communicating and a framework cemented by the proper paperwork, Charleston area seller financing can provide the missing element that makes a sale possible.
Interested in selling your Charleston area home? Visit: www.jeffcookrealestate.com
Interested in buying a Charleston area home? Visit: www.discovercharlestonareahomes.com
Jeff Cook Real Estate