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Seller financing is a little-known option that can help you buy or sell a house.

Seller financing works like this: Instead of a buyer receiving a loan from a bank, the person selling the house lends the buyer the money for the purchase. Both parties sign a promissory note that lists the interest rate, repayment schedule and default consequences.

Seller financing deals are often short-term, with a balloon payment at the end. They’re more common in markets where mortgages are hard to obtain. But overall, seller financing is uncommon because it’s unfamiliar to most parties, risky for the seller, and many sellers need the proceeds from their sale to buy their next home.

Among the reasons home sellers might consider the tactic: Because it minimizes carrying costs, it distinguishes the property from other listings, and it boosts the chances of garnering a home’s full asking price. It’s best for those who are especially eager to sell their homes.

Buyers might consider seller financing because it accelerates the closing process. It lowers closing costs and makes down payments more flexible.

But buyers should also expect higher interest rates in seller financing than they’d receive from a bank. Buyers still have to prove they’re worthy borrowers, and they need to make sure the seller owns the house outright or that the seller’s lender agrees to the seller-financing deal.

Sellers can make seller financing happen by adding it to the listing, or informing buyers of the option. Buyers can ask for it, and they can enhance their chances by sharing their good credentials.

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