How to structure a seller finance deal

8 Replies

I have been watching a FSBO SFH for several months now. In fact, by looking at the history of the property, it appears as though it was purchased for $15,000 over a year ago. It also appears as though the are flipping it, as I know the owners and they actually live near me. They listed the property last year for $79,000 with an agent. The term expired and they listed it FSBO. The price has steadily dropped to its current level, $62,000. I would like to contact them and inquire about owner financing; if they would even be interested. How would I bring that up? As well, how would I even structure the deal? Would it be similar to a mortgage? Or, could I ask for more favorable terms such as a lower down payment? Thanks for all your help!!!

Everything’s negotiable. You negotiate the price, number of payments, interest rate, and payment amount. You decide on three of those to come up with the fourth on a financial calculator. 

I would ask them what could make a deal. Maybe they already do them and have it already decided. You’ll have to ask.   Usually my owner financed notes are at least 8%. Maybe they’ll be happy with 5%. Then figure what amount of payment you can afford, then figure out how many payments. 

But it really helps to know how to use a financial calculator to play with the numbers. 

I would never take less than 10% down payment, though. 

@Lana Lee This explanation might help to put them in their comfort zone. "I know owning properties can be a headache, so I'd be willing to help you. I'd be willing to give you some money up front, and then give you a little bit of spending money each month for the next XX years. I'm sure it would be nice to get some money each month and some immediate cash in your pocket."

Its also good to refer them to your website, facebook page, etc to show them what you have done in the past. Don't rush them to give you an answer on the spot. Its a process. Have them become your friend.

Originally posted by @Brian Mcmenamin :

@Lana Lee This explanation might help to put them in their comfort zone. "I know owning properties can be a headache, so I'd be willing to help you. I'd be willing to give you some money up front, and then give you a little bit of spending money each month for the next XX years. I'm sure it would be nice to get some money each month and some immediate cash in your pocket."

Its also good to refer them to your website, facebook page, etc to show them what you have done in the past. Don't rush them to give you an answer on the spot. Its a process. Have them become your friend.

 Thank you!

@Lana Lee The benefits to seller is they get to spread out their capital gains over time, gives them a nice cash flow. The mortgage secures the property so if the buyer stops making payments they get the property back and can repeat with another down payment,etc. If note is written properly it can be resold after seasoning.  

Originally posted by @Dennis Weber :

@Lana Lee The benefits to seller is they get to spread out their capital gains over time, gives them a nice cash flow. The mortgage secures the property so if the buyer stops making payments they get the property back and can repeat with another down payment,etc. If note is written properly it can be resold after seasoning.  

Is that the lawyer, the accountant, or settlement company who creates the note?

My loans are usually less than $50k so I’ve only used my lawyer. But if I was going above that I would probably use an MLO (mortgage loan originator). I don’t plan on selling any of my loans. I like the cash flow. I get all, more, or most my investment back on the down payment. 

Originally posted by @Dennis Weber :

My loans are usually less than $50k so I’ve only used my lawyer. But if I was going above that I would probably use an MLO (mortgage loan originator). I don’t plan on selling any of my loans. I like the cash flow. I get all, more, or most my investment back on the down payment. 

 Thank you !