Seller Financing

Seller Financing

Here at Dreamcatcher, Seller Financing, also called a Real Estate Contract, is one of our very favorite concepts regarding financing your purchase.  A New Mexico Real Estate contract is a legally enforceable agreement where the seller agrees to sell and the buyer agrees to buy real property in New Mexico with a scheduled payment arrangement.

Real Estate Contracts do not pass legal title (ownership of property that is enforceable in a court of law) to the buyer, but gives the buyer equitable title (title that refers to the actual enjoyment and use of a property without absolute ownership). The buyer makes payments to the seller for a certain period. Upon final payment or a refinance, the buyer receives the deed and legal title to the property.

Seller financing is limited to properties with no underlying mortgage.  That is because most, if not all mortgages holders included what is known as a “Due on Sale” clause in their mortgage language.  This clause is used in almost all mortgage loans and stipulates that the entire balance of the loan will be due and payable if the property is sold, even if all payments are current and there has never been a default.  This clause effectively destroyed the ability to assume mortgages.

Buyer Advantages
- Easy Qualification - The only guidelines and requirements that a buyer must comply with are those of the seller, which assuredly will be less burdensome than the ones of a commercial lending institution.
- Fast Closing
- No Loan Costs - Points, origination fees, underwriting charges, appraisal, credit reports, title insurance and the surplus of other "junk" fees charged by conventional lenders can amount to thousands of dollars at closing.

- Credit Rating - This installment type of loan can also improve a buyer’s credit score by owning a home and making all payments on time.

Seller Advantages
- Fast Closing
- Maximum Price - In a Real Estate Contract, a seller can insist on and receive the highest price when offering flexible owner-financing terms. In many cases, the seller can receive more than the fair market value of the property by offering “soft" terms as people are always willing to pay a premium for non-qualifying financing.
- Tax Advantages - On an installment sale, you only pay gains to the extent you receive payments each year. This can be particularly beneficial if you have owned the property for several years.
- Cash -  Seller has an higher than average investment rate with relatively low risk.

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