Is 5% interest on seller financing a decent rate?

[Jack Zhuang]

The seller is offering 20% down, 5% interest rate, 25 years amortization, ballon payment due on 7 or 10 years (negotiable), and due on sale.

Asking price $750k. Location: SoCal. Property type: commercial

Considering the 30 year mortgage interest rate has been reduced to about 4% now, is the above term still attractive in today’s market?

[Chris Mason]

Originally posted by @Jack Zhuang:

Originally posted by @Chris Mason:

For an investment property and private financing without any FNMA BS between you and closing, and no crazy fees or anything, that is f-ing phenomenal. Take it. Now.

Or, if you don't like 5% with no FNMA BS, and it's a reasonable price for what the property is, PM me the details and I'll find someone who will within 36 hours.

What you should ACTUALLY be doing is running down your "is this too good to be true and thus a scam?" checklist. Generally 5% doesn't exist outside of FNMA and institutional financing. 

The asking price is too high and that's the issue. Plus there are issues with the property itself. The seller inherited the property and now wants passive income for his retirement without the need to manage it. 

At least it's a good news to me 5% is reasonable.

 Heh, google search "car sales four square technique." 4 things are involved in a car sale. Two of them are sticker price and financing. If you're focused on sticker price, the car salesman will give you a killer sticker price and "get" you on the financing. That's simple enough to understand and in your case only those two factors are at play. In a car deal, good luck keeping track of all four. 

That's why your Realtor and lender and listing agent are separated on a typical real estate transaction, and it's illegal for any of us to pay each other outside of what is disclosed to you on the closing paperwork.... so if a Realtor sells you a home for a price that's too high and I make up for it by losing money on the mortgage, the Realtor can't kick money back my way to make up for it. But that's effectively exactly what happens on the car lot every day. 

Fun trick for cash buyers of cars: say you want a loan. And focus on the sticker price. HAMMER them on the sticker price. They will quickly calculate how much to screw you on the financing to make up for it. Take the car at the great price with the trash loan, ensure only it has no early payoff penalty or crazy startup fees (just have them bake ALL costs into APR). Then pay the entire loan off when you make your very first payment. :)