Is full asking price for seller finance too high?

[Shequila Hamilton]

I am looking at my first deal and wanting to ask for seller financing (I attempted an FHA Loan but my student loans are hurting my DTI). There is a single family home listed in a decent neighborhood with a basement area that has a private entrance. I originally want to seller finance and refi out later on after making minor improvements. The asking price is $75,000 but the comps that I pull are estimating $55,000. I’m new so I’m not sure if these numbers are correct but I’ve done generally searches on multiple sites and 55k is about where they all land. I’m wondering should I offer his full asking price to make seller financing more obtainable or should I shoot for closer to where my “unprofessional” comps are and try to save money? Looking for advice as this is my first purchase. THIS WOULD BE AN OWNER OCCUPIED HOUSE HACK SO IN MY OPINION THE PRICE ISNT A HUGE FACTOR. Anything cheaper than rent ($800 a month) would be a win in my opinion but at the same time I don’t want to be screwed into something I can’t refi out of. Please help!!!!!! Thanks in advance for sharing your thoughts, Shequila Hamilton

[JD Martin]

Originally posted by @Shequila Hamilton:

@Jordan

@Jordan Decuir I haven't made an offer on the property just yet. I am nervous and unsure as to how to approach it being that not only is this my first deal venture, but I also am not 100% sure how the seller finance process works legally and through documentation as opposed to a traditional home loan. I'm trying to have all of my factors in order before I make an offer so that I present one that would benefit both myself and the seller without putting myself in a bad start position on my investing journey.

 That's a hefty premium. The seller knows that no one can get a loan on that property at that price because it won't appraise, which is why s/he wants to do seller financing. This is often a way to either reclaim a property multiple times or get paid for a lemon. 35% I think is way too much premium. I can see 10%, meaning that if the property really is only worth $55k then maybe the seller's risk lets it out at $60-65k, max. 

One way around this is to have the seller agree to finance neutral appraised value + X%, or finance the median of appraised value +X%. So, for example, you pay two separate appraisers to come up with a reasonable market value. Appraiser A says $52k. Appraiser B says $60k. You pay $56k + let's say 10%, which would add another $5600 to the sale price. That's fair to you and only an unreasonable seller would insist you pay an amount that's far beyond fair market value. Down side is you are going to pay for the appraisers, but if you can get it in writing that's what you're going to do you get some protection there.