Seller Financing Contracts

At Charles Bean & Associates, We Can Help With Your Real Estate Legal Needs.

Seller Financing Contracts


When branching out into a new business endeavor, not all entrepreneurs want to start from scratch. Indeed, many may prefer to buy and revamp existing businesses to bring them in line with their own business models and branding. While this can result in great success, buying and selling businesses can be very complicated. What’s more, loans for business acquisition can be hard to qualify for. As such, seller financing can be an ideal solution for buyers and sellers. In order to ensure that all parties are adequately protected, a seller financing contract should be drafted by a qualified and experienced attorney.

real estate attorney in Coeur d'Alene and spokane

What is Seller Financing?


Seller financing (also referred to as owner financing) is where the owner of the business or property lends the buyer a loan to cover a portion of the price of the business minus a down payment.

It’s worth noting that seller financing can also be applied to residential properties as well as commercial premises. So, if you are selling your home and you have a buyer in mind whom you trust but who doesn’t qualify for a homeowner loan, seller financing can also be a smart solution.

How Does Seller Financing Work?


When the deal is closed, the buyer makes a down payment (usually in cash). The seller’s loan covers a portion that can be anything up to the remaining amount of the sale price, minus down payment, and plus interest. Terms are decided by the owner/ seller but are usually not dissimilar to those of a conventional mortgage. With the help of an experienced real estate attorney, a promissory note can be drawn up and filed. This is basically a legally binding IOU.

Since seller financing rarely covers the whole price of the property or business, buyers usually supplement the seller’s loan with additional borrowing from a financial institution.

What Are the Benefits and Risks of Seller Financing Contracts?


High reward is often not without high risk, so it’s not surprising that seller financing can be both advantageous and risky for both parties.

Benefits for Buyers

The good news for buyers is that they get to close the deal faster than they might traditionally, and they’ll also have fewer fees to pay such as appraisal costs or bank fees. Unlike traditional loans, there are no minimum down payments, so there is flexibility.

Benefits for Sellers

Sellers are also presented with advantages. The promissory note can be sold to an investor, resulting in an immediate upfront payment. They can sell faster and without the need to make expensive repairs that might be requirements for a traditional lender. Plus, if the buyer defaults, the seller gets to keep everything!

However, both parties also face risks of their own.

Risks for Buyers

If the seller doesn’t own the property free and clear, the buyer may become ensnared by a “due on sale” clause that makes them liable for immediate payment of the seller’s mortgage debt in full. What’s more, most seller financing arrangements require a “balloon payment” after 5 years. And if you can’t secure the funding to meet it, you could lose everything.

Risks for Sellers

Sellers aren’t immune from risk either. If the buyer defaults they may have to go through the process of foreclosure and taking back the property. They may find that expensive repairs and maintenance are necessary if the buyer didn’t take good care of the property or premises while in their care.

Why You Should Hire a Real Estate Attorney to Help?


An experienced real estate attorney can help both buyer and seller to reach a satisfactory result that protects both parties from risk as much as possible, nullifying the cons of the process and leaving only pros.

Trust Brian J Bean of Charles Bean & Associates PLLC to help ensure equitable and binding seller financing contracts. With decades of experience and a proven track record of success in real estate law, you won’t find an attorney who works harder for you.

Get in touch with us todayto arrange a 45-minute consultation!

Brian J Bean Real Estate Attorney Coeur d'Alene and spokane
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