Question 1

What is seller financing?

Accepted Answer

Seller financing (also called owner financing or purchase money mortgage) is a transaction where the property seller provides the loan to the buyer, acting as the lender. The buyer makes payments directly to the seller under the terms of a promissory note, and the seller holds a mortgage on the property as security. Types: full seller financing (the seller finances the entire purchase price), partial seller financing (the seller finances a portion; the buyer obtains a bank mortgage for the remainder), and land contract (installment sale: the seller retains title until the buyer completes all payments).

Question 2

What are the legal requirements for seller financing in Florida?

Accepted Answer

FL requirements: promissory note (a written agreement specifying the loan terms: amount, interest rate, payment schedule, and maturity date), mortgage (recorded in the official records to secure the loan), usury compliance (Section 687.02: maximum interest rate of 18% for loans under $500,000; 25% for loans of $500,000 or more), Dodd-Frank compliance (if the seller finances more than 3 properties per year, they may be required to comply with the TILA/Regulation Z disclosure requirements), and truth in lending (the seller should provide clear disclosures about the loan terms).

Question 3

What are the tax implications of seller financing in Florida?

Accepted Answer

Tax implications: installment sale (IRC Section 453: the seller can report gain on the installment method, recognizing gain proportionally as payments are received rather than all at once), interest income (the interest received by the seller is taxable as ordinary income), imputed interest (if the interest rate is below the applicable federal rate (AFR), the IRS may impute interest at the AFR), and documentary stamp tax (Section 201.08: the mortgage document is subject to documentary stamp tax of $0.35 per $100 of the indebtedness). The seller should consult a tax advisor to structure the financing tax-efficiently.

Seller Financing

Seller Financing in Florida

Types

FL Requirements

Tax

Related Terms

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