Owner Financing assistance needed please!

[Asa Gunderman]

Hopefully someone can help steer me in the right direction.  Ultimately if I decide to continue with the deal, I will have any paperwork reviewed by my own real estate attorney.

Here's the deal:

Duplex, $71k, both sides currently rented, gross $1100/month, class C neighborhood. I would refinance the property in a year or 2. Once refinanced into a 30 year mortgage, the property will cash flow $400+ after all expenses. If the numbers weren't so great, I would have moved on already.

The seller's are a couple in their 70's who are starting to downsize from 35+ properties to 10.  They are willing to seller finance the $71k duplex for $7000 down and roughly $700/month amortized over 10 year @ 6% with no pre payment penalty.  They have a $16k lien against the property for a loan they took out earlier this year.  The husband told me the $16k wasn't a big deal and that they would get the money to pay it off.

Their counter-offer stated that they would accept the closing costs of Deed and contract preparation, and a termite inspection letter.  Great, sounds good to me.

Here's where it starts to give me an uneasy feeling.  A week or two ago, the husband sent me a text saying he would have a local real estate attorney draft the necessary paperwork for us both to review.  I told him to take as much time as he needed and I waited patiently.

Last night, he sends me in email asking me to call his wife because she had some questions for me.

I call the wife, and she tells me the following:

1. She wants to keep paying on their current loan so she doesn't have to pay high interest rates to refinance it.

2. We can keep their current insurance company or go with our own, but that we would need to keep the insurance in their name to not trigger any due on sale clause.  She said if needed, they could add me to it as a 3rd person to the insurance.

3. They want to separate the 7k down payment from the 71k total in a separate agreement to help me out and keep property taxes low (other motives?).

4. I am told that the first attorney they went to wasn't able to help them and that he/she referred them to another attorney who specialized in this type of deal, but he wanted to much money so they decided to just pull a generic contract off the internet (I do not yet have the contract in hand or I would post it).

Some big concerns I see with this.

1.  Property burns down, check goes to them/their bank. 

2.  They pass away, kids claim we have no rights to the property

3.  They stop paying their loan, property gets foreclosed, and we end up still having a separate agreement where we owe them money.

Are any of these things normal and I'm just overreacting? If I choose to move forward, I will bring up all of these questions to an attorney, but if the consensus is to walk away, I will save the money and move on.  My wife has been in banking for 10+ years and is insisting no deal without them at least clearing the lien. 

If you've made it this far, thank you for reading my entire post.  I know it is winded.

Thanks!

Asa