As lending regulations stay tighter, one thing i've seen more of in my office are deals that contain seller financing. Basically what this is, is where a buyer puts down a down payment, and the seller carries a note for the remainder of the sales price.
Basically, if a purchase offer is made for $189,000.
A buyer may put down 10% cash ($18,900)
and finance the rest ($170, 100) with the seller at 4% interest for 30 years.
The math dictates that the buyer's monthly payment ends up being $812/mo
Seller may ask for a prepayment penalty for example: 4% if the loan is paid in full within the initial 5 years.
if the revenue stream is more important to them than the cash in a lump sum, or if the interest accrued is imporatant than there will be a prepayment penalty most often.
With seller financed mortgages, the seller is "THE BANK", they sell their house for a lump sum, and monthly payments, and if the buyer defaults, they can foreclose.
What i see alot of my sellers doing is having a note servicing company service the loan, to remove any hassle...
(collect payments, send bills, keep track, etc)
and they always have the option down the line to sell the mortgage note to JG Wentworth or some other company that does things of that nature...
This is a good situation for a retiree or an elderly person, to whom a large and paid off house may be less desirable as a consistent stable income stream and a smaller/ cheaper less difficult to maintain home elsewhere. also it may help a young family or a young person who may not qualify through conventional means, into a home.
but housing prices in california are up, and the availability of funds is low, so creative financing options like seller financing and assumable mortgages aren't stopping any time soon.