How to get seller onboard with Owner Financing

Question

Hi,

I'm currently working on a deal with a seller who's looking to retire without substantial savings and buying his mobile home park with creative financing. We're giving them about $90k down but after he sent the paperwork to the attorney he has cold feet and wants to back out of selling. Because he's worried if the park defaults he will be screwed. Wondering how to build trust in him to do seller financing with us after this.

For reference we have 100% close rate, my thoughts approaching this is to counter back and say the risk of default is very rare, if he's worried about the park defaulting he just needs to save up $20k in reserves and he'll get paid $70k in income for the park for the next 5 years while he waits for balloon. If we default he's actually getting paid more as well as the park back.

Thoughts?

Robert Rixer · Answer

Put up other collateral or increase your offer. I never liked seller financing as the leverage in the negotiation goes to the seller.

Chris Seveney · Answer

@Jerry Zhang

This is not your ideal seller financing individual. People who have money may prefer to seller finance but if someone is retiring they most likely don’t care about a higher sales price they want to avoid the risk

You mention ou have a 100% close rate - then why not just buy it was traditional financing if you really want the deal?

Theresa Harris · Answer

If he wants to retire and doesn't have cash, that's why he's selling. Most people won't want to do owner financing for the reasons you mentioned-they don't want to take the risk and they want the money from the sale. $20K in reserves isn't a lot if something goes horribly wrong and there are damages if you default and he takes the property back.

Gino Barbaro · Answer

@Jerry Zhang

You can also put a lien on one of your assets for a short period of time. If you don't pay he gets the park back and your asset.

That would put me at more ease, knowing that you have skin in the game, and are going to pay me.

Gino

Joshua Christensen · Answer

@Jerry Zhang, Gino's suggestion is a strong one.

Why guess? Ask him what makes him feel more secure in the deal?

Banks ask for larger down payments to shift risk to the buyer/borrower in default. Is there a type of mortgage insurance or bond you can get for owner financing that secures his position? Can you put some reserves into a "lock box" type account that is your money but locked at escrow for up to a period of time. If you default, he gets it. If you perform, you keep it after that period?

Get creative. Main thing is to find out where his perceived risk is and what HE thinks will reduce his risk. If you're not speaking to His need, you'll miss the mark every time.

Jordan Moorhead · Answer

Figure out what they need and then explain how seller financing can get them there!

Jerry Zhang · Answer

I'm just going to tell him to rent for the first 2 years.

He doesn't have any documents, so we are the only ones that can close with them. We only buy seller financing deals because their easy to do. He tried listing with a broker and couldn't sell it before. My goal is a win-win situation, and it's basically for him to do owner financing and rent.

He wants to move to Florida, Avg house price is $350k there. If he get's 500k cash, he's paying 50k in taxes at close. Buying a new house 20% down payment. He's out 70k. Monthly debt service at 7% interest. He's paying $22k per year for mortgage alone, beside the mortgage he and his wife need 30k a year to live on. They can retire for 7 years before they are ****ed. Need to get it through to him and get him to sign.

Gregory Schwartz · Answer

Are you doing any capital improvements to the park? If you can show / prove to him that the park will be worth more because you are rebuilding the bathhouse, paving the roads and adding a playground then maybe he will feel more comfortable?

How to get seller onboard with Owner Financing

How to get seller onboard with Owner Financing

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