I have an office condo for sale. I’m considering a seller financing arrangement. What issues should I consider? What should I be aware of that can make the transaction bad for me as the seller? What should be my biggest concerns?
Math. High interest rates are the environmental ingredient you need for good seller financing. With low rates you strong buyers will get cheap bank money, so you will attract mostly individuals that won't pass the banks test - if you work with them you assume high risks for little returns (low interest rate).
Better to sell and invest the money in another deal for higher returns. Almost anything is better than lending money for 5%
-What is the borrower going to do with the property? What is their experience? Have they ever done this before?
-What's their credit history like? Do they pay their bills on time? Has anyone ever extended significant credit to them? Can they be trusted to repay it?
-Can you afford to pay the bills on this if things go south and they don't make the monthly payment? Can you afford to pay them for 6+ months? Can you afford to repair the place if it gets trashed?
If you deed the property to the buyer and take a lien position then you would have to foreclose on the buyer in the case of default. Don't do this. Instead, do a master lease with an option to buy. It's much safer for you.
Run a credit/background/employment check on them. Make sure they are who they say they are, and have the ability to repay. Ask for proof of funds in the bank account. I wouldn't enter into any agreement with someone whose broke.
You need to underwrite this the same way a bank does. If anything seems off, it probably is. Dig deeper and don't be afraid to walk away. You're the one taking on the risk here.