Lending money is one of the oldest and most profitable profitable ways to make money in our economy. The entire banking industry relies on this method as a cornerstone to their business. They lend money to business owners and individuals, sit back, and collect consistent interest payments month after month. You may not know this, but if you own a piece of real estate then you have the ability to make money the same way banks have for centuries. Seller financing in Baltimore can be very profitable if you meet a list of short criteria.
What is seller financing?
Seller financing is the term used to describe how a homeowner can act as a bank and finance the sale of his or her property to another individual or company whether they are an investor or owner occupant. Not only do you get top dollar when you sell your house but you get to make residual profits every month in the form of interest payments paid directly to you! Instead of financing the property with cash from your bank account, you’d be financing the property using the equity you currently have saved up in your property.
But I want cash now!
Think of it, if you sell your property for cash you get one lump sum that will sit in your bank account making you no money and ZERO INTEREST. You can invest that money in things such as bank savings account, but if you’ve looked at what the banks are paying these days you’d be lucky if you make more than 1% in interest per year—almost the same as if you simply let it sit in your checking account and lose value due to inflation.
When you invest in a savings account, these banks turn around and lend this money to make 3%, 4%, 5%, even 6% interest off of your cash! Seller financing allows you to cut out this middle man and keep the profit you deserve. Seller financing $200,000 at 5% will make you $10,000 a year in interest versus the $1,000 a year you’d make in a savings account. Think of all the things you could do with an extra $9,000 a year, all because you were savvy enough to consider seller financing.
How does it work?
Luckily seller financing is an easy process that is routine for most title companies in Baltimore and surrounding areas. When they transact the purchase of your house they will file what is called a Deed of Trust with Baltimore City or the county in which your house is located. This lets the court system know that while the ownership of the property is changing, you still own a monitorial stake in the property enforced by specific terms laid out in a document called a Note. This “Note” document will include all details of the financing:
- How much money the borrower owes you;
- How much interest will be paid to you, the lender;
- How frequently you will be paid (monthly, bi-monthly, bi-annually, or annually); and
- How long you will be lending this money at these terms (1 year, 5 years, or 15 years).
We are happy to provide the Note document that we have used to close on dozens of properties just like yours. We can customize this document using non-legal terminology to satisfy any of your requirements.
What are the benefits?
Not only does seller financing in Baltimore allow you to make month-after-month interest, it also allows property buyers like us to give you top dollar for your property in, or around Baltimore.
If financing is required from an outside person, then the funds may require additional hoops to jump through. This person may require a formal appraisal of the property which would cost hundreds of dollars. The person may also require that we hire a person to process the documents, a non essential step that can cost thousands of dollars. There are also additional fees required by these external lenders that range between 2-3% of the purchase price.
These are all additional steps that cost both time and money and can be avoided through seller financing. These savings are paid directly to you so you make more money on the sale of your property.
Wait a minute. This sounds too good to be true.
Yes it is true, but like any form of investment there are risks. If the person you’re lending to is not trustworthy, then they may decide to stop paying. While this sounds like a doomsday scenario, you are still in a relatively safe situation. Thanks to your recorded Deed of Trust, you are able to take back this property, resell it to another buyer, and pocket all of the interest and principle you previously collected as pure profit. There is a reason why banks are able to stay so profitable despite events like foreclosures.
What criteria makes for a good borrower?
While taking back a property can make you more profits in the long run, it is unlikely that you’ll want to deal with the additional hassle. This is why it is important that you pick a borrower that is trustworthy and has a strong track record.
At Dependable Homebuyers we have a strong track record of making payments on time and in full. We pride ourselves in our transparency and conservative purchasing approach that ensures our promises are kept. We prioritize our sellers and strive for every deal to be a win-win. There are no catches or gimmicks, and we are happy to provide all documentation required to prove why you should feel confident seller financing your property to us.
Is seller financing in Baltimore a good fit for you?
Seller financing in Baltimore is a great option for those who want to sell their house but don’t necessarily need all of their money right away. You may be retiring soon and looking for some consistent income, or maybe you’re selling a rental property and still want a replacement for the rent you were previously receiving. This option may be a good fit for you if, like in the above examples, you’re in a position where you can wait for the full benefits of seller financing to take effect.
Do I having to finance the whole purchase? I need some of the cash now.
The beautiful thing about Dependable Homebuyers is that we can structure the deal to fit all your needs. Maybe you need $20,000 for an operation and want to receive interest on the rest, or perhaps you need cash to pay off a mortgage on a property that you’d like to sell. We pride ourselves in our flexibility and ability to customize transactions so that you can sell your house on your terms.