HELP! Owner Financing Question

8 Replies

We have a SFH under contract and want to ask the owner to owner finance it. (it's free and clear...has been sitting empty 2 yrs)

If he agrees, do we have to set it up in with conventional bank style terms (x amt per month for 6 years @ x%) or are we only restricted by what he's willing to do...can we structure like a private investor loan and say 0 down with 1% (interest only)per month for a year, with 6 month minimum??

John, if you could talk someone into jumping off a bridge do you think you could be held responsible? I can tell you can be.

That means that if you bring up the deal you need to ensure it's legal and fair. Stick to more conventional loan terms and an interest rate that will not cause tax problems for the seller, 1% is too low, I'd say 3 1/2% is as low as I'd go. Instead of lower interest agree on a lower price and a higher rate of interest. You'll establish equity faster from buying lower. Make sure there is no prepayment penalty, you could refinance after a year based on the appraisal and payoff his 10% mortgage at a lower amount. Stay away from guru stuff and the crazies pulling stunts in seller financed deals.

There are tons of posts here about seller financing, start searching and reading, obviously my posts :) and use a loan servicer. Your seller will probably be exempt from the new legal requirements. You need to see your attorney or might get local information from your title company, but I suggest you use an attorney to protect yourself. Good luck :)


I didn't intend to imply we were out to take advantage of the owner because that's not the case... I was simply wondering if there was room for creativity. Also, I'm not sure I understand your recommendation...I'm not sure how 3.5% (apr, right?) is better than 1% per month with a 6% minimum. What I suggested was a typical investor loan except that perhaps the points up front would be lower . Maybe I wasn't as clear the first time around! Thanks for responding @Bill Gulley

What we talk about in mortgage rates is at an APR, seller can't charge fees and points. No, do not get creative, my whole point, do a simple deal. People seem to gravitate toward crap they have no idea about what they are doing, as if it's not something totally wild, unique, different and has windmills flying around it, it just can't be a good deal. Why, for the fun of it, just to be different? I spent over 20 years cleaning up what dinks, gurus, stupid ignorant twits dreamed up and 90% of what these wizards did, did nothing but screw things up. Do what you want, all I can do is advise you, if that doesn't excite you, go screw it up, you're on your own! :)

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Probably should have discussed that before you put it under contract, as the owner is now expecting to be paid in full. If you do talk owner financing, why offer 12% or more as an interest rate?

Hi @John Zuch

When I talk to a Seller of a free and clear property, I want to offer "cash or terms".

If you want to pay full price cash go ahead. I dont.

If you want to do an installment sale with good terms, you can give the seller more money. But your terms.

3% or more (Bill Gulley will advise) should be adhered to (see

But Investor to Investor, the terms are all negotiable.

I use the analogy of an "Annuity"


and turn the house into an investment for the Seller.

They can get 100% of equity on terms or get alot lower today for cash, from me anyway.

And, Investor to Investor, not Investor to Owner Occupant, does not involve Dodd Frank in seller financing.

Get a RMLO anyway tho to look at the paperwork.

@Wayne Brooks we are looking for an investor to fund the project and those are the terms we're discovering with private investors or hard money. We realized we could cut out the middle man by just approaching the seller with the same terms we were already planning on having to pay.

@Bill Gulley I'm not entirely sure if you were trying that hard to help or just wanted to go off on a rant. What I proposed wasn't off the wall but apparently triggered something for ya! :)

Thanks for chiming in! @Brian Gibbons

The trigger was your suggestion of doing things differently after I had advised to the contrary. Nothing personal, wasn't really a rant, my rants are much, much longer in greater detail :)

Doesn't matter if it's commercial or residential, imputed tax rates still apply, 3% right now should keep you out of that issue.

I sometimes get a tad short since there are over a thousand posts about seller financing and folks don't read them, everyone wants everything repeated just for them asking vague questions, sorry. :)

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