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Selling a Home May Require Becoming a Lender

There are few who would argue that it’s a tough market out there for sellers of real estate.  Prices are either flat or depressed, and foreclosure homes compete with seller-owned homes, making it difficult to sell at or near the desired price.  It doesn’t look like things will get appreciably better before 2011, and there are a lot of people out there who need to sell.

Those who have significant equity in their homes, and especially those who owe little or no money on a mortgage, are finding that they must consider becoming a lender in order to entice buyers to take the plunge.  While the first reaction is to run, as the seller needs cash from the home for another home or for retirement, it’s not an all-in or all-out decision.

True, a seller can loan the buyer the entire purchase price minus a down payment.  And, if it’s structured with the right protections, this can create a better retirement income than getting cash and putting it into other investments.  But, a seller can also expose their home to more potential buyers by offering to finance a portion of the purchase as a second mortgage.  It’s true that a second mortgage doesn’t have the protections of a first, but sometimes it may be the only way to get the home sold.  If the advantages outweigh the risk, the seller might want to consult an accountant and an attorney to discuss their options.

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