Someone has to provide some cash to pay the transaction fees. Your 2.5% may cover everything the title company needs to close out the deal.
My bigger concern was the comment you made on the terms. It would be dangerous to have 97.5% leverage on a 5 year balloon. Did this property appraise for higher than $550K? If not, you may want to have language in your seller financing for a contingency to extend the loan another 5 years.
@Greg Scott thanks! It will be refinanced in 2 years, that’s why the high leverage is preferred.