Homeowners who are anxious to sell often consider seller financing, which may include taking back a second note or even financing the entire purchase if the seller owns the home free and clear.
Seller financing differs from a traditional loan because the seller does not give the buyer cash to complete the purchase. Instead, it involves extending a credit against the purchase price of the home while the buyer executes a promissory note and trust deed in the seller's favor. These special circumstances must be acceptable to the lender who makes the first mortgage on the property.
The necessary paperwork is prepared by the title or escrow company after the terms are worked out between the buyer and seller.
It is critical to thoroughly evaluate the creditworthiness of the buyer first. Fear of default makes many sellers reluctant to take back a second. But seller financing can bring a higher price plus complete the sale sooner in some situations.
* IRS Publication 537, "Installment Sales." Order by calling (800) TAX-FORM.