seller Financing - Not typical deal

Investor · Miami · Member since 2020 · 70 posts · 34 votes

So this is somewhat of a personal question.

I am selling my Primary and moving to a condo on the beach - recently empty nest and dont need the space ...

It should sell around 1.2M and I dont have a mortgage - so the proceeds were either going into CD's or maybe doing some Private Lending.

But I am considering possibly holding some short term financing for the Buyer ..

Any thoughts on this ?

Thanks !!

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Patrick Roberts

Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes

10mo

If you sold for cash and this money would just sit in a CD or similar fixed income asset, then seller financing is probably a solid option if you are ok with the associated risk. If you sell to a homebuyer/owner-occupant, make sure you use an RMLO to stay in compliance with Dodd-Frank and whatever state laws FL has. Even though you should be exempted from some of the requirements, you still want to follow them for extra layers of protection.

I would give some thought to future exit plans when you structure the deal with your buyer. You can put a balloon if you want, but you may be forced to foreclose if they cant refi or sell when the time comes. I would set the note up so that you can sell if in the future as an exit if needed.

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Brandon Croucier
Lender · Nashville, TN · Member since 2024 · 700 posts · 284 votes
10mo
It depends on your risk tolerance at this stage.
What kind of return would you yield, would it sell at a higher price?

How can you guarantee repayment? Are they creditworthy?

These are all questions you should be asking yourself in order to make a decision on if this the right route to go.
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- Andrew Lax
  OP
  Investor · Miami · Member since 2020 · 70 posts · 34 votes
  10mo
  Quote from @Brandon Croucier:
  
  It depends on your risk tolerance at this stage.
  What kind of return would you yield, would it sell at a higher price?
  
  How can you guarantee repayment? Are they creditworthy?
  
  These are all questions you should be asking yourself in order to make a decision on if this the right route to go.
  
  Just about to list my house so really not sure - Assume the Seller Finance Market (not for investors) is 1or 2 points higher than conventional ... I would actually be willing to reduce the interest for higher value ... 3 year term
  
  Risk tolerance is ok - I do Hard Money Lending so I have felt some pain over the years LOL ..
  With sufficient down payment I would not have any issues taking the property back ...
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Patrick Roberts
Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes
10mo
If you sold for cash and this money would just sit in a CD or similar fixed income asset, then seller financing is probably a solid option if you are ok with the associated risk. If you sell to a homebuyer/owner-occupant, make sure you use an RMLO to stay in compliance with Dodd-Frank and whatever state laws FL has. Even though you should be exempted from some of the requirements, you still want to follow them for extra layers of protection.
I would give some thought to future exit plans when you structure the deal with your buyer. You can put a balloon if you want, but you may be forced to foreclose if they cant refi or sell when the time comes. I would set the note up so that you can sell if in the future as an exit if needed.
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Lauren Sanford
Investor · Member since 2024 · 181 posts · 63 votes
10mo
If you seller finance i would follow our 70/20/10 model we talk about on our Note show which will create you a way to get some money out while continuing to get money cash flowing.
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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
10mo
Quote from @Andrew Lax:

So this is somewhat of a personal question.
I am selling my Primary and moving to a condo on the beach - recently empty nest and dont need the space ...
It should sell around 1.2M and I dont have a mortgage - so the proceeds were either going into CD's or maybe doing some Private Lending.
But I am considering possibly holding some short term financing for the Buyer ..
Any thoughts on this ?
Thanks !!

depends on the borrower. You can do private lending and get someone with a 780 credit score. If your buyers has a 600 credit score who would you rather lend too? who do you think would be more headache? is the extra $ from private lending really gonna be a big difference than putting it in a CD or the markets (ordinary income vs. LTCG?)
Run some numbers to make sure you check after tax revenue since interest on lending is ordinary income
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Rick Pozos
Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
10mo
I have done a few owner finance deals over the years.
You might do a 10% down for the homeowner and the 90% break it down into a 70% and 20%. I like to hold it for a year or two and then sell off the 70% pretty close to par. It's a RMLO loan that has a low loan to value. With a good 1 year history you can get 95%+ for the 1st and you keep a good interest rate on the 20%.
OR keep both of them until you need or want to sell the 1st or sell both at year 5 or 10 or whatever.
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