Hey there,  are you considering buying or selling a commercial property and wondering if seller financing is the way to go? Well, you’re in the right place because I’m about to break it all down for you.

Let’s start with the good news. There are definitely some benefits to seller financing that are worth considering:

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  • More buyers: Offering seller financing can attract buyers who may not be able to obtain traditional financing. This means a larger pool of potential buyers, which could lead to a faster sale.

• • Flexibility: With seller financing, you can negotiate the terms of the loan with the buyer, such as interest rates and payment schedules. This can be a win-win situation for both parties, as the buyer gets more favorable loan terms and the seller gets terms that work for their financial situation.

• • Higher sale price: By offering to finance, you can sell the property for a higher price than if you were only accepting cash offers. Plus, you can charge a higher interest rate than a traditional lender, which could mean more profit for you.

• • Tax benefits: Seller financing can offer tax benefits because instead of a lump sum payment, you receive payments over time. This can spread out your tax liability, which could be helpful if you’re looking to reduce your tax burden or defer your tax liability.

But, as you know, there’s always a catch. Here are a few potential drawbacks of seller financing:

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  • Risk of default: The biggest risk with seller financing is the potential for the buyer to default on the loan. If that happens, you may need to take back the property. However, you will get to keep the initial deposit, any improvements and have the ability to resell the property, thus netting potential more profits.

• • Fixed cash flow: With seller financing, you’ll be receiving set payments over time instead of a lump sum. This reduces the capital gains tax due and may allow for additional tax advantages while you receive a fixed payment each month.

• • Interest rates: By offering seller financing you are in control of the interest rate which allows buyer and seller the most flexibility in negotiating the terms of the note. This makes the property more attractive to buyers who can obtain financing on the property  from traditional lenders, many times due to the property’s existing cash flow.

• • Limited market: Not all buyers are willing to obtain seller financing, so you may miss out on potential buyers who prefer their traditional financing reationships. This could lead to a longer time on the market and ultimately result in a lower sale price.

So there you have it! Seller financing can be a viable option, but it’s important to weigh the pros and cons before making a decision.

Remember to consider your own financial situation and goals, as well as the potential risks and rewards of this strategy.

AND Always remember to consult your tax, legal, and real estate advisors before entering into any potential seller financing agreement.