Owner contract terms - right to assign?

[Jonathan Blum]

Hey all-

I'm working on my second owner contract deal for a fourplex (first one was for a sixplex last year).  The seller is suggesting a 30 year amortization with 20 year payoff with significant prepayment penalty for payoff before 20 years.  There is something about being bound for 20 years with no good escape plan that makes me leery.  Unlike a conventional mortgage, I can't just go an unload this property if I decide to move, change careers, change strategies, or just want my money out of the deal to do something else.

What is the best way to write an "out" into the contract?  Do I write in a clause to sell the contract or assign it?  Do I ask the seller for different terms?  Any other creative solutions?

Thanks so much in advance for any advice on the matter.

Jonathan 

[Charlie MacPherson]

@Jonathan Blum A few rules from Negotiating 101.

1. Just because somebody asks for something doesn't mean that you have to agree to it.

2. Always be prepared to walk away from a deal.

3. When someone asks for a lot (20 year minimum), offer a little (5 year minimum)

4. The deal has to be good for all parties.

5. Pick the hill you want to die on.

So applying those few rules, the conversation goes like this:

"Mr. Seller, I understand that you're looking for a guarantee cash flow for the next 20 years.  But this has to work for both of us and because I don't know what the next 20 years will bring, I can't agree to that.  What if I had a medical catastrophe and had to sell or refinance to cover medical bills?  What if I need a cash out refi to cover capital repairs?

So I have to ask, is the 20 year minimum a deal breaker for you?  What if I gave you 5 years?"  Or "what is the minimum term that you would agree to?"

If he declines, you have to make a decision as to whether you walk, compromise or cave.