Seller Financing for Flips?

Question

Hello there everyone, I just wanted to get some opinions about seller financing for flips. If you have a seller who is willing to do a short term land contract and you plan on getting into the property and trying to get it done ASAP. Is this a good idea?

Jon Holdman · Answer

Land contracts are not limited to vacant land.  Improved properties can and are sold with land contracts (aka contract for deed.)

If you're going to pump money into improvements you would want an open-ended agreement.  Otherwise you run the risk of running out of time and having let the seller take the now-improved property back.

Bill Gulley · Answer

I suggest you avoid land contracts. If you're going to buy, use a Sub-2 with sufficient time to finish and sell. Being in title gives you rights to contract with contractors, obtain permits, finance materials, makes insurance much easier as well.

Might search the forums for Contract For Deed and know the issues.

If you're a contractor, a construction contract and option can be easier.

I'd not be concerned with a seller squaking about your sale price, the answer to that is that he could probably have taken the risks involved and done a similar deal if he knew how. :)

Steve Saulic · Answer

Thanks guys very good answers all around. Having an open ended agreement seems like the way to go so that I'm not stuck rehabbing a house for free.

Cal C. · Answer

If you can find someone to do this, then it may be a good idea.  As @Jon Holdman you are at risk of the calendar running out on you, but that can be mitigated if you have a hard money lender ready to go or have some other lender/investor willing to bail you out.

You also may catch a lot of flak from the seller if you make a good deal of money off of the deal.  HE/She probably wouldn't have a legal leg to stand on, but it doesn't mean they won't try to shame you into giving them more money.

James Stevens · Answer

I understand.  My thoughts would be, that if you didn't have it sold by the time agreed on in the contract, you could probably re-fi it.  At that point you would have already made the needed repairs and increased it's value, so you should have some decent equity in it.  It seems like it should be able to work out either way.  That's where always having back-up strategies/options comes in handy.  In case one thing doesn't work out you can move on to option 2.

Steve Saulic · Answer

A friend of mine bought a house under land contract a few months ago. He bought it with just a few thousand dollars down and agreed to pay the balance off in 3 months, then he did the renovations ( it was a vacant house ) and then he put it on the market and it sold rather quickly. My question was is  what if it didn't sell before the date both parties had agreed on. Thoughts? concerns?

James Stevens · Answer

A land contract is for vacant land where  the title doesn't convey until a later date.  So, what exactly are you asking?

Seller Financing for Flips?

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