Investor · Middletown, NJ · Member since 2008 · 2k+ posts · 1k+ votes
Hi all,
We're going to make an offer on a Florida condo, and the seller is offering financing. Asking price on the unit is $279K. We've been pre-approved for bank financing but condos require a full questionnaire to be completed for non owner occupants. We will be renting out the condo for several years until we decide to move to FL permanently.
Most condo complexes will not likely be approved by the lender due to their guidelines; seller financing may be a good option.
The seller wants to see our offer and terms. As an example, we might first offer $240K, 5% interest, 20% down, 10 year balloon, interest only.
Does anyone have any advice or suggestions? Much appreciated!
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
I'd suggest that your offer be made so that the seller won't get into trouble if they don't live in the unit, it's a non-owner occupied residential unit. If they live there, it's probably exempt from the SAFE Act, OTH, being exempt doesn't mean you can do anything you like, it would still be prudent to follow the requirements of using a mortgage originator and servicer.
Search for "what do you want Mr. Note buyer" here on BP, while the shoe is on the other foot as you are buying, and it addresses issues of a non-owner condo seller finance deal, there is still much there to consider.
Condo financing for the secondary market has many hoops to jump through, project qualifications, you may look at portfolio financing from a bank as well, but that won't be a 30 year fixed, but it's financing.
Investor · Middletown, NJ · Member since 2008 · 2k+ posts · 1k+ votes
13y
Thanks Bob, but I'm not sure I understand. To be clear, the seller lives there, my husband and I will not, and our lender knows that. That's why we may not finance with the bank, and decide to go the route with seller financing. I'll loo up "what do you want Mr. Note buyer" as well.
I will begin with a statement my father continues to repeat; The first person to mention numbers loses.
This statement is extremely true and I have verified it many times. Many times I have bought property for a fraction of what I was willing to pay simply by asking the seller for the BEST price and terms. I have bought mountain acreage for $800 - not per acre, but total price. This was the number I was offered and the number I accepted and paid.
Using my father's philosophy, ask the seller for the BEST price and terms. See what is presented. It will also let you know how motivated the seller really is or if the seller is fishing for someone willing to pay top dollar for a property that may be more challenging to sell - and therefore, attracts fewer buyers.
It is my philosophy to not auction my real estate, nor do I bid on property being sold. I offer my best price. If it is not acceptable to the seller, I move on. I never counter offer. After all, that was my best price. It may surprise you have many times the seller would contact me in a day or two to accept my offer. Negotiation is knowing when to walk away and being strong enough to do just that.
I highly recommend never being a party to any loan at any time that has a balloon payment.
Even if you are sitting on a mountain of cash with a new mountain being created every day.
I highly recommend having a conversation with a lawyer prior to making an offer or counter offer, especially if seller financing is involved.
There are many laws and rules you must consider. Protect yourself and your future. Consult with an attorney and learn the options and considerations before you make a costly mistake. Should you decide to proceed with an offer, your attorney will be a great assurance all documents follow the laws and protect you, your future, and that of your heirs.
I have been involved in real estate finance since the 1960s. My thoughts are based upon history and just looking out for the best interest for all. You have no idea what tomorrow will offer. There are so many what ifs to consider that you could not list all of them. Please do not consider any financing with a balloon.
Investor · Middletown, NJ · Member since 2008 · 2k+ posts · 1k+ votes
13y
Thanks @Tom Goans, I like you and your father's philosophy...and I will do exactly that. I'll also check with my attorney in regards to this before making an offer. I appreciate your detailed response.
Investor · Middletown, NJ · Member since 2008 · 2k+ posts · 1k+ votes
13y
Hi again folks,
The seller of the condo has not accepted our offer but wants all of our financials for evaluation. They said we should give them everything we gave the bank that pre-approved us. We already gave them our credit reports, proof of funds, and the bank's pre-approval. The reason we have not gone forward with the bank's financing is because the complex is unlikely to meet their requirements for condo financing in FL, which are quite stringent. The listing for this condo offered seller financing, which is why we submitted an offer in the first place. Without even a price agreed to at this point, is this something reasonable for the seller to ask? We have always paid cash for our investments (and have one regular mortgage), so seller financing is new to us.
Thanks!
As per the seller (from their agent to ours):
"buyer needs to provide same information as he would on a bank mortgage application. address and mortgages on personal residence and rental properties, wages, other liabilities.......same as he provided for bank loan he was approved for.....why aren't they using this finance source??
If these people dont want to provide the above, then they need to get there own financing."
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
Yes ally, it is reasonable for a seller providing financing to request income verifications, employment or tax returns, get a credit report and deposit verifications, especially in light of new laws, even if they are exempt from them, as I said, it's good to follow them. You need to allow them to act prudently as well. :)
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
13y
Tom,
The seller might have the same philosophy you do so how do you handle that. I have always talk numbers first and never lost and that philosophy has always work for me.