Agree or disagree 🧐: Seller-fin. will be more and more common

Garrett Gatton

Real Estate Agent · Lima, OH · Member since 2019 · 35 posts · 18 votes

Agree OR disagree…

As market conditions change seller-financing will be more and more common.

Annnd go 🏁….

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Michael Evans

General Contractor · Palm Desert, CA · Member since 2016 · 197 posts · 79 votes

I agree but you have to think that banks have seen this coming after all the 2.5-3% loans they have out there. If the title is transferred, it will trigger the due sale clauses. I look forward to hearing more on this topic.

Thanks,

Mike in Palm Desert, CA

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Michael Evans
General Contractor · Palm Desert, CA · Member since 2016 · 197 posts · 79 votes
3y
I agree but you have to think that banks have seen this coming after all the 2.5-3% loans they have out there. If the title is transferred, it will trigger the due sale clauses. I look forward to hearing more on this topic.
Thanks,
Mike in Palm Desert, CA
2 Reply
Arsen Atanasovski
Investor · Rochester, MI · Member since 2017 · 1k+ posts · 584 votes
3y
Depends who will be president next term if it’s the same guy, land contracts will be the way to deal real estate. Let’s be honest eggs are $9. And we just blew $500 billion on a European country that has no benefit for ours. I hope I see interest rates go up to double digits and double then now. I’ve done most of my deals on land contract so I really don’t need the banks but it’s sad how much has changed in 18-24 months. Cost of living now is up to par with Europe……. Sad.
2 Reply
Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
3y
Owner finance is my first approach in any situation where I am buying.
0 Reply
Jacob Hornberger
Real Estate Agent · Tipp City, OH · Member since 2018 · 65 posts · 35 votes
3y
I agree, interest rates are a lot higher than people have become accustomed to. If they stay/ continue to increase, people will start looking for other options (seller finance)
0 Reply
Christopher Juntura
Member since 2022 · 32 posts · 6 votes
3y
Quote from @Michael Evans:

I agree but you have to think that banks have seen this coming after all the 2.5-3% loans they have out there. If the title is transferred, it will trigger the due sale clauses. I look forward to hearing more on this topic.
Thanks,
Mike in Palm Desert, CA
All really depends on if there is a mortgage, but you can buy insurance on it as well were the due on sale clause was triggered.
I'm doing a lot of negotiations where sellers in the right position are open to it now even if it's a portion. I've noticed that the more informed sellers are better positioned to take such risks, but again I'm better off getting seller financed deals with talking to the seller directly than their agent. I'm working on one now where my agent has asked and they said no but went for a showing and the seller showed the multi and I got to have a conversation throughout the showing and they were happy to see what I could put together for a deal.
0 Reply
Dave Skow
Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
3y
@Garrett Gatton- agree - in WA state - many sellers are providing credits to buyer in order to help with permanent interest rate buydowns
0 Reply
Garrett Gatton
OP
Real Estate Agent · Lima, OH · Member since 2019 · 35 posts · 18 votes
3y
Quote from @Michael Evans:

I agree but you have to think that banks have seen this coming after all the 2.5-3% loans they have out there. If the title is transferred, it will trigger the due sale clauses. I look forward to hearing more on this topic.
Thanks,
Mike in Palm Desert, CA

You're saying that in scenarios where properties are levered sellers will not be able to carry the paper because of the bank calling the loan?
That would definitely be risky to try to seller-finance a property with an existing mortgage on it. One option would be to pay off the existing loan balance for the seller assuming there is not much left on the loan.
0 Reply
Garrett Gatton
OP
Real Estate Agent · Lima, OH · Member since 2019 · 35 posts · 18 votes
3y
Quote from @Arsen Atanasovski:

Depends who will be president next term if it’s the same guy, land contracts will be the way to deal real estate. Let’s be honest eggs are $9. And we just blew $500 billion on a European country that has no benefit for ours. I hope I see interest rates go up to double digits and double then now. I’ve done most of my deals on land contract so I really don’t need the banks but it’s sad how much has changed in 18-24 months. Cost of living now is up to par with Europe……. Sad.

As interest rates go higher and banks tighten lending standards sellers will be forced to consider creative finance to get the price they want.
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Garrett Gatton
OP
Real Estate Agent · Lima, OH · Member since 2019 · 35 posts · 18 votes
3y
Quote from @Eliott Elias:

Owner finance is my first approach in any situation where I am buying.

Elliott what is your default seller finance proposal? I understand each scenario is custom but what do you shoot for?
0 Reply
Garrett Gatton
OP
Real Estate Agent · Lima, OH · Member since 2019 · 35 posts · 18 votes
3y
Quote from @Jacob Hornberger:

I agree, interest rates are a lot higher than people have become accustomed to. If they stay/ continue to increase, people will start looking for other options (seller finance)

How long do you think it will take for sellers to move out of denial to acceptance of the market changes and their willingness to entertain creative finance?
0 Reply
Garrett Gatton
OP
Real Estate Agent · Lima, OH · Member since 2019 · 35 posts · 18 votes
3y
Quote from @Christopher Juntura:

Quote from @Michael Evans:

I agree but you have to think that banks have seen this coming after all the 2.5-3% loans they have out there. If the title is transferred, it will trigger the due sale clauses. I look forward to hearing more on this topic.
Thanks,
Mike in Palm Desert, CA
All really depends on if there is a mortgage, but you can buy insurance on it as well were the due on sale clause was triggered.
I'm doing a lot of negotiations where sellers in the right position are open to it now even if it's a portion. I've noticed that the more informed sellers are better positioned to take such risks, but again I'm better off getting seller financed deals with talking to the seller directly than their agent. I'm working on one now where my agent has asked and they said no but went for a showing and the seller showed the multi and I got to have a conversation throughout the showing and they were happy to see what I could put together for a deal.

Christopher what insurance companies do you use to cover the event that the bank calls the loan? Does this just apply to residential (1-4 units) or larger multi-family?
0 Reply
Garrett Gatton
OP
Real Estate Agent · Lima, OH · Member since 2019 · 35 posts · 18 votes
3y
Quote from @Dave Skow:

@Garrett Gatton- agree - in WA state - many sellers are providing credits to buyer in order to help with permanent interest rate buydowns

As in seller closing costs to residential buyers? Or you are seeing this on commercial deals as well?
0 Reply
Dave Skow
Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
3y
@Garrett Gatton
yes - as credit towards loan fees/ closing costs and prepaids on residential transactions - Dave
0 Reply
Ryan KellyBusiness Member
Real Estate Broker · Austin, TX · Member since 2018 · 1k+ posts · 1k+ votes
3y
@Garrett Gatton seller financing never went away, but wasn’t necessary during the hedonistic times of the pandemic with 3% interest rates and multiple offer bidding. We’ve closed a seller financing deal in the past year and I’m seeing several properties offering it now. It’s also a very common tool when buying off market.
[email protected]512-674-5478
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Trevor Richardson
Real Estate Broker · Reno, NV · Member since 2023 · 267 posts · 297 votes
3y
The thing with seller financing, is the seller has to want to do seller financing. I think for sellers who are open to seller financing the # will go up. But you can’t turn every deal into seller financing just because rates are high. So to me, it’s not a complete solution.
1 Reply
Michael Evans
General Contractor · Palm Desert, CA · Member since 2016 · 197 posts · 79 votes
3y
Quote from @Garrett Gatton:

Quote from @Michael Evans:

I agree but you have to think that banks have seen this coming after all the 2.5-3% loans they have out there. If the title is transferred, it will trigger the due sale clauses. I look forward to hearing more on this topic.
Thanks,
Mike in Palm Desert, CA

You're saying that in scenarios where properties are levered sellers will not be able to carry the paper because of the bank calling the loan?
That would definitely be risky to try to seller-finance a property with an existing mortgage on it. One option would be to pay off the existing loan balance for the seller assuming there is not much left on the loan.

0 Reply
Michael Evans
General Contractor · Palm Desert, CA · Member since 2016 · 197 posts · 79 votes
3y
What I'm saying is that when title is transferred and the new owners insurance info is sent to the bank holding the first mortgage, it will trigger the due on sale clause. It is then up to the bank to decide if they want to foreclose or simply let the new owner keep making the payments. I have heard about the insurance to get around the due on sale clause but don't know much about it yet.
1 Reply
Bud Gaffney
Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes
3y
Agreed! I always ask for seller financing when putting in offers. I am denied 99 out of 100 times LOL
1 Reply
Jay ThomasPro Member
Real Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
3y
When it comes to purchasing real estate, I always opt for owner financing first. After all, why pay a bank when you can get the same thing from the seller? This strategy has saved me a lot of money in the past and helped me grow my portfolio quickly. Plus, with the current state of interest rates, there’s no better time than now to take advantage of this opportunity! So, if you're looking to buy property, be sure to look into owner finance options before committing elsewhere. You never know what kind of deal you might find!
[email protected]832-889-5607
1 Reply
Edward Zachary Samperio
New to Real Estate · San Antonio, TX · Member since 2021 · 110 posts · 58 votes
3y
I agree that as market conditions change, seller-financing will become more common. Seller-financing can be an attractive option for buyers who may not be able to obtain traditional financing from a bank or other lender. In a changing market, where credit may be tight or interest rates are high, seller-financing may become a more appealing option for buyers.

In addition, seller-financing can be a good option for sellers who want to sell their property quickly or who want to earn a higher return on their investment. By providing financing to buyers, sellers can often sell their property faster and earn interest on the loan, which can be a better return than they might get from other investments.

However, it's important to note that seller-financing carries some risks for both buyers and sellers. For buyers, the terms of the financing may be less favorable than traditional financing, and they may be at risk if the seller defaults. For sellers, there is a risk that the buyer may default on the loan or that the property may decrease in value, making it difficult to sell.

Overall, I believe that seller-financing will become more common as market conditions change, but it's important for both buyers and sellers to carefully consider the risks and benefits before entering into a seller-financing agreement.
1 Reply
Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
3y
@Garrett Gatton

Interesting question - does anyone have any data? I'll be closing on my first SF deal soon

@Michael Evans
I know you know this but seller financing when there is a mortgage and seller financing when there isn't are completely different. I have zero interest (get it?) in a seller financing / sub to when there's a mortgage.
1 Reply
Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
3y
@Garrett Gatton
Just like most real estate questions - depend on market and MSA. Ohio will be very different than California and New York for example.
Will it increase - yes, substantially to make a dent into anything - No.
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Jimmy LieuBusiness Member
Real Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
3y
Quote from @Garrett Gatton:

Agree OR disagree…
As market conditions change seller-financing will be more and more common.
Annnd go 🏁….

Absolutely agree, with higher interest rates and prices dipping a bit, people still want top shelf prices and it won't be possible for them - therefore, seller financing comes in handy and gets these sellers their higher asking prices while giving buyers a lot of power by having a lower mortgage payment. As a investor and agent here in Columbus, I closed on a seller finance deal a few weeks ago for my client and he's getting 26% cash on cash return on this deal, so yes, it definitely works and is 1000% applicable to real life!! Cannot recommend it enough
[email protected]614-300-7535
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Remington LymanBusiness Member
Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
3y
Quote from @Garrett Gatton:

Agree OR disagree…
As market conditions change seller-financing will be more and more common.
Annnd go 🏁….

agree
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Garrett Gatton
OP
Real Estate Agent · Lima, OH · Member since 2019 · 35 posts · 18 votes
3y
Quote from @Jimmy Lieu:

Quote from @Garrett Gatton:

Agree OR disagree…
As market conditions change seller-financing will be more and more common.
Annnd go 🏁….

Absolutely agree, with higher interest rates and prices dipping a bit, people still want top shelf prices and it won't be possible for them - therefore, seller financing comes in handy and gets these sellers their higher asking prices while giving buyers a lot of power by having a lower mortgage payment. As a investor and agent here in Columbus, I closed on a seller finance deal a few weeks ago for my client and he's getting 26% cash on cash return on this deal, so yes, it definitely works and is 1000% applicable to real life!! Cannot recommend it enough

Can you give a case study on some terms for past seller-financed scenarios? It can be overwhelming to think about how many variables could be manipulated to create a win-win scenario for buyer and seller.
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