A buyer is unable to obtain typical market financing. The seller agrees to carry the financing for the buyer, at below-market terms. The sale price of this property is likely to be ________ than it would have been if typical market financing had been utilized.

A buyer is unable to obtain typical market financing. The seller agrees to carry the financing for the buyer, at below-market terms. The sale price of this property is likely to be ________ than it would have been if typical market financing had been utilized.

• A. Lower
• B. Higher
• C. The same
• D. Cannot be determined

Answer: (B)

Financing terms can make a deal more valuable to the buyer, which often pushes the price higher. When the seller provides financing at below-market terms, the buyer’s overall cost of acquiring the property is reduced. That subsidy effectively raises the buyer’s ability to pay, so the seller can command a higher price and still close. From the seller’s perspective, the present value of the buyer’s payments is greater when the financing rate is lower than market, allowing a higher sales price while keeping payments affordable for the buyer. So the sale price is likely higher than it would have been under typical market financing.

Financing terms can make a deal more valuable to the buyer, which often pushes the price higher. When the seller provides financing at below-market terms, the buyer’s overall cost of acquiring the property is reduced. That subsidy effectively raises the buyer’s ability to pay, so the seller can command a higher price and still close. From the seller’s perspective, the present value of the buyer’s payments is greater when the financing rate is lower than market, allowing a higher sales price while keeping payments affordable for the buyer. So the sale price is likely higher than it would have been under typical market financing.