When is it appropriate to bring up seller financing?

Question

I would like to put an offer in for a multifamily property that's in a fixer upper condition where the owner is asking above market.

My understanding is that the owner may entertain seller financing. So, as the buyer when in the process do I suggest financing terms? what other techniques should I be considering?

I put in a low ball offer on this same property and it was rejected out right. The property went under contract pretty soon after until the bank did not come through for the other buyer. The seller agent has reached back out to us because our original offer was all cash.

I believe I have some leverage here but I don't have any experience with owner finance deals and I want to get this property at the best possible price with seller financing if possible.

Should I just suggest financing on my initial offer? or low ball again and wait for a counter? then get into the weeds with seller financing. maybe get a verbal form agent to agent prior to a formal offer? or suggest specific terms right up front etc. etc. ? what's the recommended approach? any other tips would be great.

Marcello Di Gerlando · Answer

@Will Gaston @Todd Dexheimer @Ori Skloot @Reece Iovine @Marilyn Savage

Thankyou all.

I posted variations of this question on several BP forums. none of the responses have been as comprehensive and grounded as you have all contributed. I found the pros it seems.

I took a page from everyone here and put an offer in today. Thanks all! fingers crossed.

Eric Johnson · Answer

Marcello, you need to clarify the terms of seller financing before you draft an offer for submission.

How can you write a contract and not know the terms of which the seller will agree to finance to? Call up the agent and have a discussion and find out what the seller wants. Do they want to hold the note long term? Just provide you acquisition and have a short term note, so you can refi? These are some questions to ask as you go about navigating this deal.

Todd Dexheimer · Answer

I would make the offer with seller financing, just be sure that you don't overpay. At the end of the day it is still all about the buy.

When I make an offer for seller financing, I include the payment schedule, so they can see how much they are making.

Ori Skloot · Answer

Similar to @Reece Iovine I like to make a cash offer and I always mention that I may be able to do better if they want to help at all with the financing. Sometimes I send a letter of interest and I give them three offers: all-cash, traditional financing, seller-financing.  The offer steers them to the option that is most ideal for me.

Marilyn Savage · Answer

Depending on how much seller Is financing , you can pay a lot higher than a lowball offer. It’s all about terms. We talk to the seller and tell them exactly that I can pay him this amount but it all depends on the terms. Then have it figured out ahead of time what’s fair to you and fair to him. There are no guidelines and terms can be  what they need to be. I never go less than two years but literally you can go up to 30 years if the seller will except it. Then you decide are you going to pay them monthly like the mortgage pay down or you just gonna pay him interest every month at the end of your term you still owe on the entire amount. Terms  make the difference

Reece Iovine · Answer

I always like to offer a traditionally financed offer first to establish some credibility. Sounds like you have already done that by offering cash. Now I'd go back to them and say hey I can do this CASH or this seller financed. Something a little higher that still works and seller financing terms that work for you.

However make sure the seller has no mortgage or that your down payment will be enough to pay off their existing mortgage.

Will Gaston · Answer

@Marcello Di Gerlando I like to bring up seller financing when the seller is stuck on their number.

There are tons of scenarios where it can still be a good deal for you: Interest-only periods, below market interest rates, longer amortizations, lower down payments, etc.

My experience is that there are a lot of sellers who are adamant about the sales price. That is their easiest way to gauge whether or not they have "won." Let them win on the sales price if you can win on some of the other terms.

When is it appropriate to bring up seller financing?

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