An estimated four million homes were sold in America last year based on reports from the real estate sector. That figure is expected to surge in the coming years as more people see their dreams of homeownership become reality and more current homeowners decide to upsize, downsize, or relocate. Most people take the conventional approach to buying and selling a home.
Those on both ends of that spectrum generally work with real estate agents. Sellers place their homes on the market and wait for interested prospects to come along. Once they do, they take out mortgage loans, and that money is transferred to the seller. From the buying perspective, aspiring homeowners seek out mortgage loans. After finding the right property and a lender that deems them creditworthy and offers the loan terms that work best for them, they make an offer, go through negotiations, and eventually close on the property. From there, they make mortgage payments to their lender until their loan is paid in full.
Exploring a Different Alternative
Of course, the conventional homebuying and selling options aren’t right for everyone. Whether you’re looking to buy a property or hoping to sell one, you may be looking for a different approach. Owner financing with help from a company like MORE Seller Financing may be the right solution for you. Seller financing entails forgoing the middleman to at least some extent with the seller essentially becoming the lender. Different seller financing options are available. Each one has its own key features and benefits. Read on to learn more about the different types of seller financing and what makes them stand out.
Contract for Deed
One option is a contract for deed. Also known as a land contract, this is one of the most common types of owner financing. As is the case with all seller financing situations, the seller and buyer agree on a price, down payment, monthly payments, and other terms. From there, the buyer pays the seller directly rather than making payments to a conventional lender. In an arrangement like this, the seller holds the deed to the property until the buyer pays it off, but the buyer can still take ownership and move into the home while making payments. Once the balance is paid in full, the property deed is transferred to the buyer.
With this type of arrangement, buyers may have lower down payments than they’d be required to come up with for a traditional mortgage. Monthly payments and interest rates are negotiable, which often works out well for the buyer and the seller. Payment schedules may be more flexible as well. That can make homeownership more manageable for some buyers. There may be fewer closing costs and other fees with a contract for deed as compared to the conventional homebuying process too.
In addition to those benefits, closing usually takes less time, which is yet another advantage for both buyers and sellers. Furthermore, both buyers and sellers may have fewer complications and setbacks with this type of transaction because there are fewer parties involved and it’s a less formal arrangement. Since the seller retains legal ownership of the property until it’s paid off, that provides extra protection in case the buyer defaults.

Installment Sale
Installment sales work in much the same way as contracts for deed. Buyers and sellers work directly with each other, coming to an agreement on the price of the property and other terms of the sale. Sellers may choose to charge interest rates or opt out of doing so. There’s plenty of room for flexibility in an installment sale, and the seller can tailor the agreement to the unique needs of the buyer if he or she so chooses.
One of the most significant differences of an installment sale is the way it works for the seller. This type of arrangement can result in reduced tax liabilities. Instead of paying capital gains taxes on a lump sum from the sale of a property, the seller can spread out the capital gains over a period of time. Sellers can also control the capital gains taxes they pay on interest from the sale since they’re able to choose how much interest they charge rather than basing it on the industry norm.
Carry-Back Mortgage
You also have the option of a carry-back mortgage. An arrangement like this allows the seller to create an official mortgage agreement for all or part of the price of a property. A carry-back mortgage doesn’t allow as much room for flexibility, but it does provide added protection for the seller. It can potentially give the buyer extra protection as well since there’s a legally binding written agreement involved.
Whereas installment sales and land contracts may or may not include down payments and interest, carry-back mortgages almost always come with both. A buyer receives the property title immediately upon closing rather than the seller holding onto it until the balance is paid in full. In a carry-back mortgage arrangement, the seller may pay higher capital gains taxes because of the interest he or she receives. On the other side of that scenario, the buyer may be able to claim at least a portion of the interest he or she pays as a tax deduction.
Lease Option
A lease option is another possibility. This entails leasing a property from its owner for a specified period of time. At the end of that period, the lessee can choose whether to buy the property or leave it. It’s more commonly known as a rent-to-own arrangement.
In this type of agreement, the seller and buyer agree on a purchase price in advance should the lessee ultimately choose to buy it. That can give buyers the added benefit of knowing how much they’ll ultimately pay for the property ahead of time and give them time to save and prepare for it. It can also protect sellers against dropping market values and general depreciation.
Deciding Which Seller Financing Option Is Right for You
Circumventing the conventional real estate market can be beneficial for both buyers and sellers. Owner financing is a common alternative. Different types of seller financing are available, each with its own advantages. Local real estate market conditions, tax implications, the buyer’s financial situation, and the seller’s financial goals should all come into play when deciding which one is best.