What is meant by "seller financing" in real estate?

Seller financing refers to a situation in real estate transactions where the seller directly provides financing to the buyer, enabling the buyer to purchase the property without relying on traditional lenders like banks or mortgage companies. This arrangement can be beneficial for both parties: the seller can facilitate the sale by making it easier for buyers who may struggle to secure conventional financing, while the buyer gains access to a potentially more flexible payment structure.

In seller financing, the terms of the loan—including the interest rate, payment schedule, and any down payment requirements—are negotiated directly between the seller and the buyer. This arrangement can also allow the seller to earn interest on the financing provided, which is usually higher than what they might obtain from other investment avenues.

The other answer choices represent concepts that do not accurately capture the essence of seller financing. For instance, the idea of charging higher interest is not a defining characteristic of seller financing; rather, the terms can vary widely based on negotiation. The concept of a mortgage with seller liability does not reflect the direct transaction dynamics involved in seller financing. Lastly, offering a buy-back guarantee aligns more closely with a different set of financing strategies, such as options or guarantees, and is not a standard feature of seller financing.