Seller Financing Comes Back

Seller financing home for sale
Seller financing home for sale

Sellers once again might want to consider "owner financing" as a method to get that house sold -- and reap some tax breaks, too.

Owner financing (also known as "seller financing," "taking back the note," or "an installment sale") is estimated to be used in 10 percent to 15 percent of today's home sales. The term describes a legal transaction in which the buyer obtains financing to purchase a home through the seller, instead of through traditional banks, credit unions or other lending institutions. Essentially, the buyer makes payments directly to the seller.

Buyer and seller agree on a purchase price, down payment, and regular monthly payments to the seller. Payments are spread over time, like an installment plan. This spreads the seller's taxes due on capital gains over time. Sellers are taxed only as principal is received.

Could seller financing work for you?