How to approach seller for owner financing

4 Replies

I'm a rookie investor and have found a property that would be better suited for me if the seller was willing to owner financing. How exactly do I approach the seller on this? From what I have found the owner owes right around what he is asking on the property. Is Subject 2 something I pursue first? Or should I jump right to owner financing? What questions should I be asking the seller to help me decide the right approach? Is there any due diligence I should be doing to help find the best avenue?  

The property needs serious rehab and looks to be around 50% occupied (20 units in total). If some additional numbers would help answering a few of these questions I can post them. Thanks!

Speak to a local real estate attorney with experience with this and see if it is possible without violating the due on sale clause.  Prepare an offer and hand it to the seller or selling agent.  May also help to provide a credit report, W2, and anything else a normal financial institution might use to qualify a person for a loan.

@Spencer Rossie  The seller would not be able to offer seller financing (in the traditional sense) unless they paid off the mortgage.  So you would have to buy subject to the existing mortgage.  On larger properties sometimes mortgages  are assumable if you are approved by their lender.  But probably not.

"Subject to" for the remaining payment schedule of the mortgage is risky.  If you plan on rehabbing and selling or refinancing and holding, say, within a year, this could be an option.

Subject To is seller financing, the seller finances that sum remaining on the underlying mortgage under the same terms, they are on the hook to the lender, you're on the hook to the seller.

Agree with Larry, good for short term holds. If you rehab, you better know you can refi it, it is possible to lose it.

Only one way to avoid the due on sale, when the transfer arises out of an estate transfer or estate planning transfer, all others are subject to the acceleration clause at the option of the holder or holder's instructions.

Yes, see your attorney.....and I'll be down some time, have a shrimp boil and pass a good time! :) 

I was wrong, the seller owns the property out right. 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here