Seller Seconds on Commercial Financing

[Ron Steele]

Are there certain price points that lenders tend to allow seller seconds. Or that investors are more sophisticated and understand seller seconds may be apart of the transaction.

I'm looking at something at around a million... 10%-15% seller and 10%-15% equity and a 75%-80% ltv.

Is this attainable in today's market?

What type of lenders should I be presenting this too?

I've generally stayed with smaller multi family units, but want to look at a bigger building?

Thanks

[Joel Owens]

Hi Ron,

The 10 to 15% seller held second is a part of it.

At around 1 million it's small time loans. The insurance and conduits start usually around 2 million and up LOAN BALANCE after the down payment.

At 1 million putting 15% down and a seller held second of 10% you are talking a 750,000 first loan. You will be looking at local banks to regional banks for this. They will absolutely want personal guarantees, recourse, any cross collateralization etc.

Local banks have auditors on them to do ultra cautious underwriting with maximum security from the borrower. Downside with local banks is the term loans are 5 to maybe 7 years and very rare but sometimes can land a 10 year term loan. Amorts range from 20 to 25 usually. Rates tend to be higher on the smaller commercial loans as the small banks have cornered that market as the big boys don't want the business. The banks typically do allow a seller held second as long as borrower has skin in the game. Being local will help you and also sometimes you can get better loan terms from your bank that is already holding your deposits to keep your business versus a bank quoting the loan only.

Hope it helps.