Zillow Advice: Lenders - Are there any tax advantages for Sellers to finance the sale of a home/investment property? Thx.

It's important to understand ...

Tue, 20 Jan 2009 02:53:00 GMT

It's important to understand there are 3 basic types of seller financing. They do have different legal&tax issues:

1. Lease-option or rent-to-own
2. Land Contract
3. Private mortgage

You should check with a CPA and attorney before selling your home via one of these.

Hi Nikki,Seller financing ...

Tue, 20 Jan 2009 00:00:00 GMT

Hi Nikki,

Seller financing is a great way to help sell your property and bridge the gap as you write. There are a few ways to structure the deal and it would be prudent for you to speak with a tax advisor so you know what is best for you.

One of the main benefits of seller financing and/or an installment sale is that you will take your gains over multiple tax years. You can take the tax-free gains (if owner-occupied) and spread the taxable gains out over time.

This type of installment sale works really well if you will have taxable gains on either a owner-occupied or investment property. It's a way to sell income property without have to do a 1031 exchange that avoids huge taxes upon sale.

In addition to being a local San Francisco agent who represents sellers and buyers, I am on the board of my company's investment club. We do our own version of seller financing by providing loans. I am familiar with the process and can help advise on how to screen potential buyers so it is the safest risk possible.

Best of luck with your plans and let me know if I can help!
Cheers,
Danielle Lazier, Zephyr Real Estate
www.SFHotlist.com

It's all about perspectives! ...

Mon, 19 Jan 2009 04:31:00 GMT

It's all about perspectives! ...and my perspective is from an investor's perspective. Seller financing is golden! No formal qual process and terms are fully negotiable. In this type of market, it's not unheard of to obtain great terms that are mutually beneficial. The buyer gets a better rate while seller avoids the full cap gains tax while also earning a higher rate than offered in CDs or money markets accts. In addition, seller financed deals don't show up on credit reports making it more and more difficult to finance investor properties. As a buyer, I seek out seller financing. As a seller, I have financed buyers.

As for the sellers point ...

Mon, 19 Jan 2009 04:23:00 GMT

As for the sellers point of view "yes, you can avoid the tax on the full sale and postpone it til the future perhaps when you reach a senior age and taxation is lower for you then, by putting a prepayment penalty until then..as for income you will now have writeoffs to compensate a wash

Hi Great questions, Seller ...

Mon, 19 Jan 2009 04:15:00 GMT

Hi Great questions,
Seller financing should only be considered as a last resort for a few reasons.
A. Usually they will give you a higher rate than what you actually qualify for
B. Any points you would use on a bank mortgage will not be applied to seller financing, therefore you will have nothing for a tax cedit there.
C. Interest paid on seller financing and bank financing qualifies the same
D. There are many options to securing a down payment for a bank loan, especially with the FHA programs, and Seller assist of 6% towards fees.
E. Regarding a higher interest rate howevr, yes you would have th higher deduction, if you'd prefer the deduction in lieu of the lower rate.

As for the sale of the home you are usually looking at around 20% taxed on the whole sale, versus the taxed amount of an income ie; 1200x12mo - per year. Call me if you have any questions. You can click on my picture for details