Seller Financing the Down Payment

4 Replies

I was listening to show 182 on the BiggerPockets podcast today and was blown away by this idea of the seller financing the down payment of a property. I am wondering if anyone has had any experience with this method of financing. What I am getting from this is that if I find the right bank I could potentially have a case where I can get into a deal with minimal cash and get financing through a bank for less than 80% of the appraised value. Can I get some input. Does the following scenario make sense:

Income-producing multifamily appraised at $100,000

Seller willing to set up financing with the buyer for $20,000

Having the RIGHT bank financing 80% or less of appraised value or approx. $80,000

Will a bank require or want buyer's cash in the deal?

Will a bank consider taking the equity in the deal as a down payment in such a transaction?

Most banks will not like that scenario. They want you to have cash in the game. No big national or regional bank will do that. Possibly a small local bank would consider some version of it.

For example. If the bank only puts up 50% and is in first place and the seller puts up 45 or 50% they might do that as they are well protected. They may also consider "Cross Collateralizing" in other words if you have another property that has some equity, that could be on the loan also.

@Ned Carey

Thanks for the advice. I would be extremely curious to see how a local bank would prefer to set deal like this. I will do some research.

Talk to lots of local lenders. They will each have a little different perceptive on what they will loan on. this can change over time as regulators and their own internal controls look at the mix of types of loans they have. 

They wouldn't want to do that, however you can seller finance and negotiation no down payment with the seller directly 

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