What is seller financing in real estate?

Seller financing in real estate refers to a situation where the seller of a property provides the necessary financing to the buyer, acting as the lender rather than relying on a traditional bank or mortgage company. This arrangement allows the buyer to make payments directly to the seller over time, often with agreed-upon interest terms, facilitating the sale even if the buyer might struggle to qualify for a conventional loan.

This alternative financial option can be beneficial for both parties: the seller may sell the property more quickly or at a higher price, while the buyer might circumvent some of the strict requirements often associated with traditional financing. It can also cater to buyers who may have difficulty securing funding through traditional methods, making real estate transactions more accessible.

In contrast, the other options depict differing methods of financing. Traditional bank financing involves securing a mortgage or loan from a financial institution, and immediate cash sales imply that the buyer pays the full purchase price upfront, eliminating the need for financing. A government assistance program typically involves aid from governmental bodies to help buyers with purchasing costs, which does not equate to seller financing. Thus, the essence of seller financing distinctly lies in the seller stepping into the role of the lender.