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A Choice Between Lease Option or Seller Financing to Sell Your House Fast Property advertisements come with several ways like lease option and owner finance especially when the real estate market is soft. During this time, property owners understand that it is now the time of buyers’ market rather than the sellers’ market, leading these owners to be creative in selling and in concessions. Therefore, sellers are turning to some creative financing solutions in order to entice buyers, shorten listing times and create compensation for the tight credit market. Their first approach is a lease option which allows a potential buyer to lease or rent the property combined with an option to later buy the property. Usually, the potential buyer’s option money being paid is non-refundable, but a portion of the lease payments is often also applied on the selling price of the property.
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The next option that a seller would offer to a potential buyer is called the seller financing, and in this type of arrangement, the seller confirms to finance all or a portion of the purchase for the buyer. This method is also termed as owner financing or instalment sale, where the buyer makes the payment to the seller for the agreed period of time rather than getting a bank loan or a traditional mortgage loan.
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Considering what these methods offer, it is also advisable for the seller to check out the pros and cons from his or her point of view. In the seller financing method, among the pros are that the down payment is usually greater, the real estate taxes, property insurance and upkeep are the responsibility of the buyer, and that the buyer is more likely to act like the owner of the property since they have already bought the property. Another advantage of this option is that there is greater liquidity with private mortgage note payments than the lease payments thus making it easy to look for investors who will pay cash now for their future payments. An obvious positive advantage of this financing is that the seller earns interest on the amount being financed. Compared to the eviction process which is faster and easier, the con in this arrangement is that it will take time for the seller to foreclose once the buyer becomes delinquent with his or her payments. Another disadvantage of this arrangement is that the term of repayment can be longer than a sale based on instalment. With the lease option, the positive side of it are a faster eviction process if the buyer misses payments and that the owner of the property will gain some upside of the value of the property if there is an appreciation of real estate market and if the buyer will not push through in buying the property.