Sitting Down With Seller to Discuss Seller-Financing

New to Real Estate · Portland, OR · Member since 2020 · 35 posts · 5 votes

I have been listening to some of the podcasts where the guests have been discussing seller-financing. I would like to learn more about the process from the buyer's perspective. Does anyone have any advice in regards to how to approach a seller who is offering seller-financing? Or maybe how to suggest seller-financing as an option to a seller who hasn't already offered that option? Is this option only common for properties listed as "for sale by owner"?

In addition, what would the buyer need to have prepared when they actually sit down with the seller to discuss the terms? Any advice or information is appreciated!

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Jonathan Taylor SmithBusiness Member
Rental Property Investor · Durham / Raleigh (Triangle), NC · Member since 2015 · 841 posts · 802 votes
6y
@Dillon Francis - If its an MLS listed property, the seller's Realtor is likely to be a major obstacle to anything at all creative or non-standard - like seller financing. Although you will find the occasional property indicating this purchase option in the MLS.
For both seller-financing and lease-options, when initially speaking with the potential seller, I do not directly mention either of these terms. Before giving it a scary name like "seller-financing", and getting an almost immediate "NO" in response (a confused or scared mind always says NO) - I first make statements and ask questions to determine if anything other than a full cash-out purchase may be workable. Once you know that a non-standard purchase method may work, you explain it fully, make it clear and get some initial buy-in - before giving it a (now no longer scary) name.
Find out what they will be doing with the money upon sale to learn if they might be better off taking payments over time + interest. Or make a dual offer, such as $150,000 conventional or $180,000 if they take payments @ 4% over 5 years. So you can say, "I can pay you $150,000 for the house now, but what would you do with that money?" - "Would you like to make an additional $30,000 and get $180,000 for this house?"
This approach works well when they do not need the money for something specific or will be saving / investing it for a return of less than 4%. You can even mix-up the offer with some amount of cash upfront if they do need a portion of cash for some purpose. Best of all, when you do get around to cashing them out years later (having made every payment on time as promised), they are primed to become your private lender.
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Joe Aiola
Real Estate Agent · Fleetwood, NY · Member since 2018 · 264 posts · 235 votes
6y
@Dillon Francis great question and I think @Jonathan Taylor Smith gave an excellent response. Definitely read that a few times and apply those tips!
The only two things I would add is to sell them on the cash flow they'll be receiving, as well as them acting as the bank with the ability to take the house back if something should go south. The security of knowing the house can still be theirs if payments aren't made should eliminate a lot of the risk for the.
Hope this helps - best of luck!
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