One thing here is the seller can not loan at 0 percent. They must at least use the AFR ( applicable federal rate).
This may be considered a wrap around loan. I’ve never done it but I have heard it talked about. My main concern is when title transfers there is a chance the bank will call the old loan due. They have the right but may or may not do it. I would consider a lease option safer for your seller to be honest.
Originally posted by @Zackary C Dunn :
Hey everyone, I’m a newb so don’t roast me to bad for a stupid question. I have an off market opportunity that I had the seller on the hook at 57,000 if he finances for 18 months with a balloon payment and zero interest. Come to find out he has a mortgage balance of 57,000. I offered to do a lease with option to purchase but he was against it because as he says there is nothing locking me into purchase other than my deposit. Any ideas would be much appreciated.
You can do a lease option. Increase your deposit to entice the seller? Your terms are only attractive to you. I don't blame him for balking. I'm assuming you can't go out and get traditional financing? If you can't, what's going to happen in 18 months that can't happen today? You getting an inheritance and are gonna pay it off in full?
@Zackary C Dunn Always evaluate the deal independent of the financing offered. You didn't mention if you're going to live in it or if it's a rental, but if a rental, do the numbers make sense? What's the property worth and what kind of repairs are needed? If it's only worth $50k for example, then it's a bad deal.
@Zackary C Dunn Why not simply go to a bank and get financing? If the answer is that you have no money or credit, then you should walk away from the deal and find something else.
Wow thanks everyone for the replies. I guess I should have put a little more info. It’s a fix and flip. The repair estimate is 20,000 to 30,000 depending on finish and arv is sitting between 115 and 120. Came up with the lease option in order to keep financing fees down. Sent him the contract Friday and he was all about it. Monday he backs out because he doesn’t want me to be able to assign it. I came back with 54,000 if I can’t assign do to having to double close. He now won’t respond to calls or email.