Seller Financing in South Carolina: What You Must Know

For property sellers in South Carolina, seller financing can offer a strategic option. The competition involved in the current housing market can pose a challenge for many individuals. There is a high demand for properties and a low supply, both of which can complicate things when potential buyers begin their search for a home. Another difficulty posed is securing a traditional loan, which is why some buyers turn to seller financing in South Carolina.

Seller financing can assist in the home buying process as the owner of the home offers the buyer a loan. It can help the buyer avoid certain disadvantages and difficulties posed by the traditional mortgage loan experience. It can also offer several key benefits, such as closing costs at a lower price.

However, selling financing can come with its own set of disadvantages too, which is why it can be vital to work with a real estate attorney who knows the ins and outs of seller financing laws in South Carolina.

What Is Seller Financing in South Carolina?

At its core, seller financing is a way for buyers to purchase homes or other forms of property without having to obtain a traditional loan from a bank or other lender. Through seller financing, the seller of the property essentially becomes the lender and extends credit to the buyer of the property so that the purchase price can be covered, typically excluding the down payment. With seller financing, the middleman—like the bank—is cut out of the sale.

Seller financing can be an advantageous move for property owners as it can speed along the selling process and also attract a wider range of interested buyers, some of which may not qualify for a traditional mortgage loan. There are several types of seller financing available to individuals in South Carolina. These can include the following:

• Land Contract: In a land contract, the seller of the property finances the sale for the buyer. The buyer then must repay the seller under the terms of exchange laid out in the land contract. In this scenario, the buyer obtains equitable title to build their equity and only gets the property deed once they have paid the purchase price in full.
• Junior Mortgage: In this form of seller fencing, a seller can assist the buyer in the purchase of the property by taking out a junior, or second mortgage. In these cases, a seller may cover the cost of the original down payment, which the buyer will then repay from their own primary mortgage loan.
• Assumable Mortgage: This form of seller financing offers buyers the chance to purchase a piece of property at a lower interest rate and take on the responsibility of the current mortgage of the seller, which can allow them to purchase the property.
• All-Inclusive Mortgage: In an all-inclusive trust deed, or an AITD, the seller of the property pays off their existing mortgage with the payments they receive from the property buyer. The seller can also retain any amount that exceeds the cost of both the mortgage and the down payment.
• Lease Purchase: In this scenario of seller financing, also known as a rent-to-own contract, a contract exists between the landlord of the property and the renter. This agreement allows the renter first buying rights to the property they are renting.

Pros and Cons of Seller Financing in South Carolina

There are pros and cons to seller financing, and it is wise to understand these as both the buyer and the seller before walking into a scenario that requires this kind of arrangement.

• Advantages to Seller Financing: The main pro of seller financing is that it allows you to purchase a home or other property even if you are unable to obtain a traditional mortgage loan due to poor credit or other related reasons. Depending on the situation, you might not even be required to undergo a credit check. Seller financing also allows you, as the seller, to forgo having to pay a real estate agent’s commission.
  Other advantages to seller financing can include attracting a broader range of buyers, experiencing a faster selling process, and having control over the transaction as the seller.
• Disadvantages to Seller Financing: Like all things, seller financing can also come with its own set of cons. These can include, for the buyer, potentially hefty down payments and higher interest rates than those required by a traditional mortgage lender and sellers who refuse to negotiate on their home or property price. Buyers also typically have less protection in seller financing arrangements.For sellers, disadvantages can include a risk that the buyer might eventually default on their payments, which could lead to foreclosure; you won’t be receiving the full amount upfront, which can be difficult if you are in need of quick cash; and you may have other responsibilities as a lender that you wouldn’t be beholden to in a traditional loan situation.

FAQs

Q: Are Interest Rates Lower with Seller Financing?

A: In some cases, yes, working with the owner of a property to obtain seller financing can offer you lower interest rates if the seller so chooses. However, in most cases, the seller will actually raise interest rates, which can cause these rates to exceed traditional mortgage rates. This can be one of the disadvantages of purchasing a property through seller financing.

Q: How Do I Sell a Home with Seller Financing?

A: In order to sell a home with seller financing, you must first determine whether you own the house outright or still have duties toward your own mortgage loan. You will then want to consult with a real estate attorney who can review your situation and counsel you on whether this move is right for you. They can help you draft up the necessary documents to ensure everything is done in a legal and legitimate way.

Q: Why Would a Seller Offer Seller Financing?

A: There are several reasons why a seller might offer seller financing in the purchase of a home or other property. One of these reasons includes speeding along the purchase process, as seller financing can allow you to circumnavigate things such as a traditional bank or lender loan, which may require inspections. Another reason for seller financing is to attract a wider range of potential buyers.

Q: How Much Can It Cost to Hire a Real Estate Lawyer in SC?

A: It can be difficult to offer an exact number as to how much it may cost to hire a real estate lawyer when walking into a scenario of seller financing in South Carolina. There are several factors involved in these legal situations which can influence these costs. These factors include the complexity of your arrangement and how competitive the current housing market is in your area.

Speak with a Trusted Real Estate Lawyer Today

Selling or buying a property in South Carolina can be a confusing process, especially if this is your first time. The team at Mack & Mack Attorneys can help review your citation and determine if seller financing is the right option for you. Contact our offices today to schedule a consultation.