Seller Financing relative to Equity

[Dillon Kenniston]

Hi BP team,

How should a property owner's level of equity inform the structure of seller-financed offers?

I love the idea of making multiple offers on a property where total offer amounts differ based on financing structure. But seller's financing seems to require differing structures relative to the property owner's equity. For example:

• Very little equity - subject-to?
• Moderate equity - wrap mortgage?
• High equity - full seller financing?

Am I even in the right ballpark?

Thanks so much!

[Nathan Gesner]

Originally posted by @Joe Yobaccio:

@Nathan Gesner, I hadn't considered that a seller has already profitited and so may be more flexble, so thank you!   I am in So Cal and home prices keep climbing, so the low to no equty sellers are probably not here in great numbers.  In your market, when determing motivated sellers, do you look for any indicators like negative equity or 100% equity or absentee owners?   Perhaps 100% equity, out of State owners may be a good seller to contact vs. the desperate owners.  

 For example, the last property I bought was a six-unit. The owner came to me asking to sell it and thought it was worth $325,000. His jaw dropped when I told him it was actually worth $460,000. Long story short, I gave him market value and the different options available for selling it. He appreciated my honesty and offered to sell it to me for 15% below market AND owner finance it because he was already making far more than he had anticipated.

I'm closing on a sale tomorrow where the seller is 92. She owned the property for nearly 30 years but her health is failing and the medical bills are piling up. We're picking it up for about 20% below market. Not because we're taking advantage of her but because she is desperate to sell fast and we were able to provide that.