Paramus, NJ · Member since 2018 · 64 posts · 14 votes
According to my real estate agent, deals like the one I encountered are extremely rare and sought after, but im a bit worried its too good to be true. I made an offer on a house and because I am doing 50% financing, the owner offered to lend the other half himself and be paid over the next 30 years, at an interest rate lower than what the bank is offering (albeit, not much lower). I will save on a ton of costs from not going through the bank. I am worried though that with this private deal, the contract may end up being very tight and might screw me if I made a mistake. I really had no idea people would even do this, so im not sure what to do. Does anyone have any thoughts?
So I specialize in creative financing/owner financing deal structures so I should be able to help you out.
Could you provide more information about the deal- i.e. what you are paying, how much a month (to bank and him), what you are planning to do with the property (live in? Rent?), price of property, interest etc...
It's rare a seller actually even understands owner financing so this could be a good opportunity for you to save money or even make money if you do it right.
It's all about the numbers and what you plan to do with the property. So give us some more info and I'll see what I can do to help :)
@Andrew Giunta Think of the Seller as being a bank. He wants to earn the interest over the term of the loan. Your worries will be alleviated by using another professional. Ask your agent any questions, she is the first professional on your team. Your agent will help you understand the inspections. Contractors will help you understand the cost of any needed repairs. A title company, or maybe an attorney (depending on your local rules) will be used for the closing of the sale. My closing agent oversees the paperwork so that there are no mistakes in securing the loan (the promissory note, which spells out the terms) to the property, filing the deed with the county, collecting the transfer taxes and getting the monies to the right parties.
If I were you I would jump at it. In fact I would be asking if he is willing to carry even more of the cost.
The guy is looking for a income stream. He may be willing to finance way more than 50%. If he does negotiate a lower interest rate while you are at it. The more he is willing to carry the lower he may be willing to go on the interest.
It looks like you've got some great advice. I believe you can also use a loan servicing company to handle payments/taxes/insurance and everything is kept track of.
@Andrew Smith - I would jump all over this, pursuant to review with your lawyer as others have advised. I financed my first 4-plex with owner financing six years ago and it has worked great. Paperwork is simpler, interest rate is better, and upfront costs are lower.
Any time I buy a property I always ask about owner financing. Best of luck!
the best is when you find a retiring landlord wanting to dump his portfolio and willing to do seller financing with a low down payment ( 10%)and low interest 4-5%
I would ask how much the seller would be willing to finance? And I wouldn't do a 30 year fixed. I'd ask for maybe 4.5%, amortized over 30 years, with a 7 year balloon. I'm getting 5.45% from my bank this week, with 20% down. But it is a 7 year balloon.