I’m new to BP and working on my first deal. I wanted to see if anyone could provide me a little insight on some of the intricacies of seller finance.
The seller is a close family friend who has told me they are willing to sell me the property below market value. The property is in a great neighborhood that is renter friendly. The seller owns the house outright and understands this will be a rental property.
I plan to speak to the seller about seller financing. The numbers work well for both parties, but I know the seller will have questions around a few of the moving parts of making the deal happen. More specifically, some of the questions I need some help with are:
How do seller finance contracts work? Do we simply need an attorney to write a contract up based upon the structure we agree to.
What tax implications are there for the seller?
Is the closing process similar to a traditional closing process when obtaining lending from a bank?
Sorry if these questions are elementary, I want to ensure that I am able to answer these when they come my way.
Think about it as two separate transactions with the seller. One is you purchasing the property and the second is both of you signing a financing contract. I would suggest using an attorney since this is your first property and the person is a family friend. I would probably involve a CPA as well.
Closing is similar to a conventional without proceeds to the seller for the actual sale (other than any down payment).
As for tax implications, here is a link to another post that should be helpful.
This was extremely helpful and exactly what I was looking for. Thanks for the help!