Seller Financing

[Trevon Peracca]

Good afternoon BP,

I have a motivated seller that would like to do business with me. The property is in great condition. He rehabbed it for his mother to live in and then she unexpectedly passed... He owns it free and clear: I want to wholesale the deal but if he won’t agree to the price I would like to offer seller financing to get him more money on the deal and I could hold it as a rental.

He had it listed on the MLS with a family member for 140k, but he responded to my direct mail and said he is willing to negotiate.

Can some please explain how to structure a seller finance transaction as far as paperwork and dealing with title/escrow etc.?

Here are the Numbers:

ARV: 150K

Repair Cost: 15K (Garage needs to be torn down, need to pour a new slab under the garage, and rebuild garage.

Average Rent: 1400

If I wholesale it, my MAO will have to be around 75k, in the event he does not accept that, I want to have an alternative solution to his problem.

Please share thoughts

Thanks,

Trevon

[Jeff Bridges]

Just a thought on the offer 150k ARV x .70 -15k repairs= 90k Max purchase offer (this is a flip calculation but you should still profit when you sell eventually and is a good start)

After you negotiate price and find contract price you both agree on. Part of your negotiation is finding out what the seller is willing to do for seller financing. Do they know what it is? If no, explain it to them and the benefits of earning interest beyond getting cash at closing. Do they need all of the money now or some of it at closing? Are they willing to hold a note for 3,5,10,15,30 years? Find out the longest they are comfortable with. Then find out what is the lowest interest they would accept for the note (as low as 3% to as high as 10%, lead with 4% and see if they are receptive).

If the stars align and you come to agreement on price and terms of seller financing, then you engage a real estate attorney from title company or law firm of your choosing, ask them to draw up a contract with the above terms (they will charge their hourly fee to do this, so ask for pricing in advance), have your seller sign contract. Then once signed, you ask your attorney to draft a promissory note and a mortgage (additional fee) for you both to sign at closing. You could even try to have these legal costs divided between seller and buyer at closing. This is it in a nutshell, but your attorney can verify the process and how they like to do things... But the most important hurdle is getting the seller agree to terms. the rest is pretty straightforward...