Making an offer

6 Replies

So I found a deal that I want to make an offer on. This deal is off the MLS and he has offered Owner Financing.

What is the best way to approach this?  Should I send him a formal letter?

Do I specify the owner financing terms that I can accept and negotiate from there. Or should I tell him I accept the price with owner financing and let him dictate the terms.

The one concession I need is an out after an inspection of the foundation.

This is easy. Get a copy of your state approved purchase contract. Put a 10 day contingency in the contract for inspection. Make your offer according to what makes sense to you, offer an honest earnest money deposit, and also state that you want owner financing at x percent for x years. If they agree, pay the EM to a title company. NEVER give it to the seller. 

Those terms should all be part of your sales contract, since that is going to be the source of your financing. You should negotiate terms just like you would negotiate anything else. Your sales contract should have standard language giving you a time frame for inspection and rejection. Owner financing terms will (should!) depend on the nature of the deal. If it is a property that will be difficult for anyone to finance, or if you are paying some type of price premium, financing and interest should be in your favor. If you are the problem, however, in that your credit/income is spotty, you should prepare to probably pay a bit more for being a riskier buyer. In today's rate market, all but the worst buyers should be able to get 6% or less on a conventional mortgage, so if you are being presented higher terms than that I would consider bringing your own financing or walking away. 

@Ryan Van Fleet , if the home is on the MLS, that means the seller has an agent representing him. Unless you are very experienced, you should have an agent representing you, too.

@Mindy Jensen This is an owner financed deal that is off market.  I should note that the seller is a Real Estate agent.

Get a copy of a Res Purchase Offer/Agreement and fill it out with the terms that work for you. Make sure when your writing the contract to make the escrow period long enough to do a thorough due diligence. Consider if you want section 1 and/or section 2 pest remediation and who is paying for it, how long will your inspection contingency last (17 days is the norm where I'm from), who is paying for the inspections, do you want to split the cost of a home warranty, who's paying transfer tax and fees, who's paying escrow and title, who's paying title insurance, make sure you know what's conveying with the property and what is not and make sure it's written in the contract that way. Who are you opening escrow with and what kind of seller finance terms you want? How much EMD are you willing to put down ($1,000 is the norm in CA). Do you want a per diem if escrow doesn't close on time? These are all questions you need to have figured out when you make the offer. If and when he accepts you are going to open escrow with your EMD in the amount you specified with in your agreement. Also understand if you back out of the contract without using your contingency to do so you will most likely lose your EMD and in some cases can be subject to liquid damages so be tactful drafting your contingencies. Also only give money to escrow, never ever give it directly to the seller! Also please read the prelim and closing title report before the close of escrow!

@Ryan Van Fleet , if the seller is an agent, you should have an agent to represent your interests, too. 

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