BiggerPockets

I ask this question because in the last year,all of my residential sales involve owner financing. I would say that 80% of prospect buyers expect an interest rate of under 6%.
When they find that we are talking north of 7.5%, they balk.
Are any of you finding this?

Bryan, I'm talking sub prime borrowers and agents. They haven't looked at hard money lately.

Mike I am confused do you do commercial or residential?

Your tag line says commercial.

There is always a bid-ask gap between a buyer and a seller when it comes to price,terms,interest rate,etc. and is to be expected.

Who is being owner financed?There are Doctors,Attorneys,etc. that have impeccable credit and reserves but just can't get conventional financing because of tax write offs to lower income.

These buyers expect to pay very little above market interest rates.They are not interested in inflated rates.You can owner finance a buyer with a real high interest rate but if they default real quick you have gained nothing on the bad credit buyers.

So the sweet spot is in the middle where you get as much as you can on rate and a decent price.

if you are naming the price, you gotta take it easy with the terms. And vice verse. I understand your desire to get the highest selling price and highest interest rate, but there is gotta be a win for the buyer somewhere.
After all, it's the buyer's market.

Guy's, You all have Great points!To Joel, I'm a commercial agent by choice but, you do what you have to do. The owner finance deals are mine as an investor.
I find that folks can't come up with a 1% down payment, much less 10%.
I guess ny point is when I shoulder the risk, regardless the price of property,I should be able to charge a risk premium. Only makes sense, lenders call it debt yield.
I really appreciate this forum. I think it's the best on the web.

IMO, you are using the wrong financing vehicle if they have only one per cent down, unless they provide other collateral, that is a bad loan to start with and will not be viewed well in court if you have to go there.

No skin in the game usually dicatates and option being financed along with a lease to provide possession.

I would also say that you never finance inventory, small machinery, furniture and fixtures and disposables (inexpensive stuff) unless the seller wants to just dump it. Financing commercial with a business entity is entirely another game. Good luck...

Hi Mike.

I walked away from a wholesaler's deal because a)the price was too high, b)they wanted a higher than avg int. rate and c)wanted 25% down. I tried to negotiate some of the terms...they wouldn't budge. I walked and left it for another investor who didn't know their numbers.

Yes, are some buyers unrealistic? Sure. Do you want it sold??

Jason, I can only speak to usury in Texas. 21% is the max. that can be charged. Except for pawn shops which can charge 1% per day.In the early 80% I saw Commerciial Inter. Const. loans at 20% + 3-4 points. The lender, usually a S&L kept a point as an origination fee. We all know what happened.Hope that helps.

I think it depends on who you are selling to (investors or owner occupants). I had an offer from an investor: price was market value, 10% down, and 10% interest. Maybe I was expecting too much. For someone living in the house, it might be good.

Mike,

I took a Texas SAFE act class last night and the usury in Texas is now 18%.

Are you using a licensed mortgage broker to close these deals? The disclosure laws are unreal. The cost to use one is about $450.00 and they do the disclosures. Also, you E & O protection in front of you. I would also use an attorney so that you have that E & O protection.

Some fun points are:

- 7 day waiting period after disclosures are made.
- Closing cost estimates cannot be more than 5% off.
- Another 3 day waiting period if anything changes in the contract.
- No mark up on title or credit report fees.
- Must impound taxes & insurance under certain loan terms.

You can do 5 seller financed deals per running 12 months, but are still required to do all of these disclosures. Fine is $25K per occurrence if you get caught not doing them.