Seller advertised seller financing then changed there mind.

6 Replies

I'm a little frustrated at this last deal I've been working on. I'm working with an experienced broker that specializes in finding SF houses for investors who buy/fix/sell them. Over lunch one day I shared my vision of buying Multi family and apartment buildings that are seller financed and using private money from some investors I know,  that are looking for a better return on their dollars, to cover the down payment, closing costs and repairs/improvement.

This peaked his interest in expanding his search criteria outside of what he specializes in and within a day he had a sweet triplex within a few miles of my office/shop. So far so good!

I found it hard to get him to offer the package I put together and after some compromise and adjustment we agreed on an offer that we thought would be resonable. 

List price: 219,000

Our offer: 190,000

5% down 9,500

Contract for deed 30 years at 6% 7 year balloon.

Seller owns the building and it has no mortgage or loans.

Sellers realtor wouldn't verbally present the  offer to his seller to start negotiating and when we sent them a fully detailed purchase agreement the reply that came back was.

"The seller no longer wishes to do a contract for deed" "cash out only"

Not sure if the seller really ever even heard the offer and I think his good ole boy Realitor didn't want to spend time on this.

Combined Rents are: $2000

2/1 is 950

2/1 is 600

1/1 is 450

Owner pays all utilities ( no separate meters) Bad veriable for cash flow in the winter here in Minnesota... and the summer too) 

Comments? Feed back? 

@Chad Zaback

Using the info provided and allowing 50% of GSI for debt I get a cash flow of -$82.18 after debt service

Using 60% because you are paying all utilities I get a -$282.18 after debt service 

This does not sound like a deal under those conditions

These numbers do not take into consideration the 7 yr. balloon

5% down will be a Non starter for most owners considering seller financing. 10-20% will be normal minimums.

You may be right about the realtor not wanting to deal with it. The commission gets complicated on those deals. Does the entire downpayment go towards commission?or just a part of it?  when does the balance get paid? When the sale is not actually completed for seven years (land contract is not really finished til it's finished, if you know what I mean) then there's a lot of room for things to go wrong.

Besides, as @Steve Smith  pointed out,  this is not a promising deal at all. If you bring your potential investors in on something like this I don't think they, or you, are going to end up happy.

 @Steve Smith you are correct. However, the rents are all low for the area. The area is a safe and desirable place to live and close to schools, metro transit and jobs/ factories. We had planned to increase rents by 15% over 2 years adding $300 per month and refi in three years to a conventional 30 year fixed rate loan at a lower rate than 6%.  The property will appraise at around $240,000

@Wayne Brooks, what you are saying is true and that's part of the compromise made between me and my broker. I wanted the wording to say buyer to pay closing costs and all buyer and seller  commission. I was expecting some kind of counter offer from seller. I was willing to pay all commissions at first but my realtor talked me out of it. I think that would solve any out of pocket expense on the sellers part and keep the brokers happy to do the deal as long as they get their fair share. One thing that backfired was not leaving something for everyone. 

@Jean Bolger, that's what I don't get. Since there is no mortgage, and sellers moving out of state and motivated. The seller would get a regular payment every month of about 1,100 plus in 7 years they would get the balance in full. This is what I was hoping to convey to the seller; the fact that, right now they are losing money, and have to deal with the property. If they sell to me they would basically have someone managing their property and sending them a check in their new state making a 6% return on their capital.

@Wayne Brooks, what you are saying is true and that's part of the compromise made between me and my broker. I wanted the wording to say buyer to pay closing costs and all buyer and seller commission. I was expecting some kind of counter offer from seller. I was willing to pay all commissions at first but my realtor talked me out of it. I think that would solve any out of pocket expense on the sellers part and keep the brokers happy to do the deal as long as they get their fair share. One thing that backfired was not leaving something for everyone.

@Jean Bolger, that's what I don't get. Since there is no mortgage, and sellers moving out of state and motivated. The seller would get a regular payment every month of about 1,100 plus in 7 years they would get the balance in full. This is what I was hoping to convey to the seller; the fact that, right now they are losing money, and have to deal with the property. If they sell to me they would basically have someone managing their property and sending them a check in their new state making a 6% return on their capital.

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